Just weeks ago, Microsoft set the wheels in motion for an agency
consolidation review at the holding company-level. So the deal
means that just as SMG is pumping dollars into Microsoft, they're
pitching to keep the Redmond tech giant as a client.
The companies declined to give a dollar value on the deal, or
its duration. They did say it involves a "first look" at consumer
research from Microsoft. Together, they'll create ad products that
Microsoft Advertising VP Steven Kim said "nobody has thought about"
for brands like Skype. "It's about bringing video to life across
different screens and across multiple screens at the same time,"
Mr. Kim said.
It comes as Xbox readies a slate of original content, and
premium video buys dominate the conversation around this year's
Digital Content Newfronts and TV's upfronts.
But the partnership isn't exclusive to SMG, according to Mr.
Kim. Even so, SMG is in a different position than the other
agencies Microsoft serves. The partnership could give SMG leverage
with Microsoft at a time when its client business is
SMG's MediaVest is the three-year incumbent on Microsoft's
massive media buying and planning account -- SMG supported
Microsoft's $730.4 million in domestic measured media buys in the
first 11 months of 2013, according to Kantar Media -- and will
surely be defending the business with its Publicis counterparts. There's no evidence
directly tying the shop's new ad deal with Microsoft to its
strategy around retaining the client, but a deeper commitment to
the client's ad team certainly doesn't hurt its chances. Talks
around the deal began months ago, said the agency group.
The deal also adds to a historically bumpy relationship between
Microsoft and SMG parent Publicis Groupe, which also owns media
agency network ZenithOptimedia. The French holding company
entered into a commercial agreement with Microsoft in 2009 when it
bought digital agency Razorfish from the tech giant. At the time,
execs put the commitment at "a couple hundred million dollars"
annually for ad inventory.
A year later, Publicis was having trouble meeting the
media-spending commitment to Microsoft and industry executives said
the group could face a penalty if it failed to meet the spending
levels committed to Microsoft search and display.
Regarding the new deal, a Microsoft spokesman said, "This is not
a part of the agreement we struck with Publicis some years ago
– complementary to it, but technically separate."
Last week, Microsoft named 22-year veteran Satya Nadella
the successor to outgoing chief executive Steve Ballmer.
Microsoft's global ad revenue was $2.9 billion in 2013, while
Facebook's was $6.4 billion and Google's $38.62 billion,
according to eMarketer.