Is Microsoft Pulling the Plug on Advertising?

Microsoft continued the largest layoff in the company’s history this past week, reportedly disposing of its global advertising sales team after declaring it redundant.

Global ad sales were responsible for selling ads across Microsoft properties including Bing, Xbox, MSN, Outlook, Windows 8, and Skype.

Microsoft chief executive (CEO) Satya Nadella’s plan was to slash 18,000 jobs (14 percent of its workforce) from July 2014 to the end of the fiscal year next June. The first round of cuts put 13,000 employees out of work, while another 2,100 got the axe in September.

Another casualty in the Microsoft streamlining was the public face of SEO and webmaster support, Duane Forrester, who announced on his blog October 30 that his job had been eliminated. In a brief post entitled “I Lost My Job But Not My Perspective,” Forrester wrote, “Microsoft announced changes within the structures of several groups in the company. My group was affected…”

As for how many ad sales staff were affected, reports vary. WSJ.com reported “several dozen” advertising positions were lost as part of a strategy to get rid of ad executive specialists with a single-discipline focus in favor of having each one work across the entire Microsoft portfolio. WSJ‘s coverage was the tame version, in which the cuts were characterized as Microsoft “trimming” some ad positions.

Business Insider, on the other hand, bluntly calls it the firing of the division and claims the cuts go far deeper than reported and will see the departure of the majority of the global salesforce.

Does this hint to Microsoft getting out of the ad business? In fact, they’ve been scaling back their ad operations for some time, most notably selling off their Atlas ad server to Facebook last year. When Nadella came on as CEO earlier this year, his vision for a more device-centric Microsoft was clear, yet their recent steps toward that vision have often seemed contradictory. For example, the company just brought digital advertising ringer and former MSN executive Bob Bejan back on board less than a month ago and just now has cut most of their global ad sales team.

But shhh… don’t question it too loudly. Just more than a year ago, Microsoft’s general manager for display ads wrote a blog post in response to questions about the company potentially outsourcing their digital ads business. In response to one tech journalist’s inquiries, Greg Nelson wrote, “It turns out that he took a series of disconnected events like the sale of Razorfish to Publicis, the aQuantive write-down, and our sale of Atlas to Facebook, pieced them together, and surmised that they foreshadowed our eventual exit from the advertising business.”

These more recent layoffs again beg the question: Is Microsoft getting out of the ad business? In his post last year, Nelson emphatically stated, “As someone who has worked at Microsoft for 15+ years, I can say this with unflinching confidence: our digital advertising business has never been more important to the company, more integral to our future, than it is today. Never.”

Does it hold true today? That remains to be seen but in all honesty, it’s getting more difficult to square a vision of Microsoft-the-advertising-powerhouse with Microsoft-the-pared-down-device-business with cuts aimed squarely at the ads side of the business.

Duane Forrester, widely respected in the SEO community, noted that companies have to make decisions like this all the time. It’s true, but one has to wonder if Microsoft is making the right decisions lately. If there’s some master vision that will see their advertising business continue to grow despite these cuts, it’s not exactly clear at this point.

And their ad business is growing – just this July, eMarketer predicted 20 percent year-over-year growth for Microsoft’s net worldwide ad revenues in 2014, which would see the company surpass Yahoo for the first time by taking 2.54 percent of the market. Still, it’s a small share of the pie considering Google’s monster 31.45 percent slice. Has Microsoft given up on catching the undisputed online ads Goliath?

We’ll have to wait and see.

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