In a plot twist fit for an episode of “Stranger Things,” Netflix chose Microsoft as an advertising partner to build the ad-supported version of the streaming service, leaving ad industry watchers slightly surprised. Microsoft has key advertising technology infrastructure that will now go toward powering the first ads on Netflix, but is still a nascent player in connected TV. While the partnership came as a shock, in hindsight, it could make total sense.
“It’s a surprise upset win for Microsoft,” said Kevin Krim, president and CEO of EDO, a data and measurement firm in the connected TV space. “It’s not very often that a potentially huge source of premium video advertising comes on the market.”
For weeks, Netflix had been talking with potential partners to help develop its first ad-supported service, which will be cheaper than the ad-free version. Last month, at the Cannes Lions International Festival of Creativity in France, Netflix co-CEO Ted Sarandos spoke at the main stage of the conference, and Netflix executives were mingling with advertising leaders to discuss the prospects for the streaming giant to enter the ads game. Netflix was close to picking either Google or FreeWheel, an advance connected TV buying platform owned by Comcast, according to people familiar with Netflix’s talks at Cannes, where it spoke with both companies.
On Wednesday, Microsoft became Netflix’s “global advertising technology and sales partner,” Greg Peters, Netflix’s chief operating officer, said in the announcement.