How Microsoft Gained Netflix's Advertising Business and Google Lost It

• Netflix chose Microsoft over Google and Comcast to help build a new ad-supported streaming service.


• Netflix needs to grow revenue quickly and Google's offerings came in too low, a source close to the trial said.


• As for Microsoft, some employees see the deal as a way to grow their Azure cloud business.

The advertising industry faltered then


Netflix

chose Microsoft as the technology and sales provider for its new ad-supported


stream

service about the supposed favorites Google and NBCUniversal parent Comcast. Many insiders were unaware that Microsoft was even under consideration.

Microsoft came armed with adtech unit Xandr and a global ad sales team. With its recent moves into video games, it could also help Netflix increase its video game ambitions. And unlike Google with YouTube and Comcast with Peacock and Xumo, Microsoft doesn't have a streaming service that would compete with Netflix for TV ads.

But according to a source close to the trial, Google's warranty was also "underwhelming."

Given Netflix's recent woes — the stock has lost nearly half of its value as it loses subscribers — it needed a partner who could help it make a quick buck. It tried to charge high rates for its ads, on the fringe of other premium streaming services such as


HBO Max

.

For its pitch, Google assembled a team that "went to the top of the company" and made an aggressive offer on the risk it was willing to take, but it didn't satisfy Netflix, which wanted revenue guarantees of "billions," the company said. source.

“We got feedback from Netflix that our numbers were disappointing,” said this person.

Google, for its part, also had concerns that Netflix might eventually want to bring its ads into its home, this person said.

"This deal only made sense for Google to go through the trouble and reconfigurations to get to market if Netflix outsourced it permanently," the source said.

NBCUniversal and Google declined to comment.

Microsoft's announcement was aimed at building Netflix's advertising business, but some Microsoft insiders saw it as a way to win Netflix's cloud business in the future.

Netflix uses Amazon's cloud platform AWS to deliver its streaming video to customers. Netflix said in its most recent annual report to investors that it runs the "vast majority" of its computing on AWS.

But the relationship between AWS and Netflix has been seen as complicated as Amazon Prime Video has become a major competitor to Netflix's core business.

"What I see is that Netflix is ​​testing the Azure/Microsoft waters with a few features first," said a Microsoft employee.

AWS has not responded to a question about whether the deal with Netflix has changed. Netflix said AWS will remain its cloud infrastructure provider.