SOURCE: Microsoft May Abandon The Ad Business Over IE10 Fiasco

exit sign

Photo: gruntzooki / Flickr, CC.

Sources tell us that Microsoft’s recent surprise decision to make the “do not track” feature a default setting on Internet Explorer 10 has caused tension not only among its advertiser clients but within Microsoft’s advertising division, as well.The fractures within Microsoft could lead the company to abandon the ad sales business altogether, our sources say.

While the announcement to automatically eliminate tracking cookies in the new browser was celebrated by privacy advocates, it has been slammed by the FTC and the online ad community since it goes against Microsoft’s previous agreement to a default browser setting that would require consumers to opt-out of tracking (much like what’s available on Google Chrome).

There’s been a slew of recent personnel changes among Microsoft’s top ad executives—most notably Richard Dunmall and Marc Bressel in April. But general manager of Microsoft Advertising Rick Song, who was visible particularly during the company’s annual digital showcase events, is the first bigwig to leave following the surprising IE10 “do not track” default announcement.

The Song announcement was made today and came as a surprise to advertisers contacted by BI.

Of course, the timing could be completely coincidental: After six years at Microsoft, Song is moving to evp/digital sales at Clear Channel Media and Entertainment, working for an expanding company under the Tim Castelli.

Ambushed by their own company
Nonetheless, two sources tell us that times are rocky inside Microsoft Advertising.

An ad executive involved with the IE10 dispute likened Microsoft’s browser and ad departments to entirely separate companies. Indeed, IE lives within the Windows division — Microsoft’s core business, and a major source of revenue (about $19 billion a year) and profit (about $12 billion a year), while Microsoft Advertising is part of the Online group, which is on track to lose more than $2 billion this year.

The source told us that the disconnect left the advertising team in the dark about the do-not-track default.

“The decision was made with zero discussion or awareness by the Microsoft Advertising side of it,” the source said. “And yet by the same token the company has been putting them, forcing them, forward in front of the rest of the advertising world to back it, and that’s been tough.”

In March 2011, Microsoft’s corporate vp of the advertiser and publisher solutions group, Rik van der Kooi, explained the company’s decision to give consumers the choice to use do not track on IE9 by assuring advertisers that an important “thing to keep in mind is it’s an option; we are not activating it by default. So that’s what we’re doing.

A year later, Microsoft announced IE10, which completely went against van der Kooi’s previous statement by making do not track the browser’s default setting.

Group M CCO John Montgomery, who works closely with Microsoft and sits on its customer advisory board, told us that Microsoft Advertising appeared surprised by the change, and he suspects that the decision was made by Windows Group.

“But the advertising people were immensely professional in terms of explaining what Microsoft had done,” Montgomery said, “They toed the corporate line—it’s very, very difficult for someone who works for Microsoft to say, look, we don’t agree.”

The move placed Microsoft Advertising in the position of having to sell untargeted ads. Montgomery likened it to “going back in time with consumer advertising, because consumers are going to see more irrelevant ads.”

“The Microsoft [Advertising] guys … arranged meetings with the senior advertiser [clients] long before this decision was made,” said Montgomery, meaning they were hamstrung by the browser division by the time the client meetings arrived. He cited one such meeting between Microsoft and WPP, Group M’s parent company, at the Cannes Lions festival in June. “[The default “do not track”] was a very topical and controversial discussion” that almost “stole the show.”

WPP CEO Martin Sorrell even wrote Microsoft CEO Steve Ballmer personally last week to complain.

Another ad executive was more brash: “Microsoft set up leadership discussions with all the major advertising groups, and Rik was there, and at all the discussions they had their heads handed to them on a platter.”

Abandoning the ad business?
In addition, “Everyone in the industry is chattering about whether Microsoft is abandoning the advertising business,” our source says, especially after Microsoft admitted earlier this week that its 2007 $6.2 billion ad tech investment in aQuantive was a complete waste.

In the last month, the company has also announced plans to cut its sales force by 15 to 30 per cent in June, reduce its Microsoft Advertising TV Network, and look into selling its stake in

Considering Microsoft’s recent investment in Skype, Montgomery says, “We shouldn’t write them off, they have some very strong ad people, but we have been flummoxed.”

Microsoft emailed this statement:

Multi-stakeholder discussions regarding the appropriate response to the DNT signal are ongoing and we look forward to continuing to participate in them. We believe a uniform industry-wide response is important in order to provide a consistent consumer experience across the web. As we announced in February, Microsoft Advertising intends to treat the do-not-track browser signal as an opt-out of behavioural advertising under the Digital Advertising Alliances self-regulatory program. Microsoft does not yet respond to the DNT signal, but we are actively working with other advertising industry leaders on what an implementation plan for DNT might look like, with a goal of announcing more details about our plans in the coming months.

If you have any information on what is going on in Microsoft Advertising, email LStampler @ businessinsider .com with information.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.