Netflix selects Microsoft for ad platform partnership

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After announcing that it would launch lower-priced, ad-subsidized plans as part of efforts to stem subscriber losses, Netflix has selected Microsoft as its partner for advertising technology.

The streaming giant reportedly took meetings with almost every big name in advertising — ranging from Google to Comcast — ultimately the deal went to Microsoft.

In many ways, the choice was a surprise given that Microsoft doesn’t have as much video advertising experience as others the streamer reportedly met with over a potential advertising partnership. However, insiders tell The Hollywood Reporter that Microsoft’s Xandr advertising platform, which it just closed on acquiring from AT&T earlier in 2022 (it was previously known as AT&T Advertising and Analytics) for a reported $1 billion, will be a key component.

Xandr could give Netflix the ability to deliver relevant ads to customers without the overly evasive tracking that is starting gain the attention of regulators around the world. Although delivering targeted ads based on consumer behavior can be highly effective, it also risks becoming too intrusive, something Netflix may be keen to avoid at the risk of scaring off customers and running afoul with lawmakers.

Xandr’s vast data could potentially allow Netflix to link its ad-supported accounts with profile data and show ads that are likely to be relevant to the consumer in question without crossing the line into being invasive. This could also be blended with Netflix’s existing data on the customers’ viewing habits to determine what ads to show.

Microsoft also operates advertising platforms for its Xbox platform and Bing search engine, with deals that power Yahoo! and privacy-focused DuckDuckGo’s advertising programs. Netflix execs also reportedly saw Xandr as being a flexible platform that could allow Microsoft to iterate quickly if strategies shift, according to THR.

Selecting Microsoft also lets Netflix neatly avoid striking a deal with a company that could be seen as being in direct competition like some of the other, perhaps more robust players in the video ad market, such as Comcast, which owns Peacock, or Google, which controls YouTube.

While Netflix has begun to explore the world of online video gaming, which Microsoft’s Xbox is already strong in, it hasn’t fully built out this offering and, in fact, the Microsoft deal could bring the companies together in some way, though that was not specifically mentioned in the announcement.