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The Long Goodbye?

Despite the missteps, Microsoft insists it's still serious about advertising. The ad world has doubts

Illustration: Peter Oumanski

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There was a time not so long ago when Microsoft threw the biggest digital media event of the year. In 2006, at the company’s once-annual but now-defunct Strategic Account Summit, Donny Deutsch recorded his CNBC show The Big Idea live on stage, rapping with a mellow Jay-Z and then with the visionary himself, Bill Gates. At night, the gathering would feature a live concert with the likes of Soundgarden frontman Chris Cornell or a private VIP show with performers such as Dave Matthews. One year, everybody even walked out with a free Microsoft Zune (R.I.P.).

It was at the 2006 event that an amped Steve Ballmer, CEO of Microsoft, threw down the gauntlet against Google as it introduced adCenter, the ad-targeting and delivery platform that promised to transform online advertising as we know it.

For Microsoft veterans, that must seem like an awfully long time ago. Fast-forward to this May, when the house that Gates built hosted a presentation during the Digital Content NewFronts in its sleek New York office—one of 20 or so dog-and-pony shows by major digital players heralding the arrival of top-notch video content on the Web. Downstairs, a 100-deep line of agency execs waited impatiently for ID badges and then the elevator. Upstairs, the presentation took place in a low-ceiling room with not nearly enough seating. If there’s any truism in the ad world, it is don’t promise an associate media buyer a free bagel, a place to sit and a great show—and then not deliver. As one attendee recalls, “Theirs was the only [event] that got worse as the week went on.”

To give credit where it’s due, Microsoft was hosting digital showcases way before it was cool. But this year’s event fell flat in every way. Yes, there were appearances by Web star Felicia Day and Olympian Dominique Dawes, but there was no Jay-Z, no Bill Gates and, perhaps not surprisingly but very telling, no Ballmer.

For years, industry watchers have questioned Microsoft’s commitment to advertising. Those doubts have only grown since the company’s recent broad-based retrenchment. In past months, the company pulled out of MSNBC.com and closed its TV division, mobile ads group and much-respected Branded Entertainment and Experiences Team (BEET). On top of all that, Microsoft recently jettisoned several top sales execs, including Richard Dunmall, Mari Kim Novak and Marc Bresseel. And many attributed the company’s $6.2 billion write-down in July to the much-maligned acquisition of aQuantive for $6 billion in 2007.

The talent drain has only continued of late. Adweek has learned that Todd Dunlap, who was vp & COO of Microsoft Advertising, has left the company to become managing director and president of Booking.com. Jason Scott, gm, Microsoft Advertising Asia, resigned last week. 

According to interviews with a dozen current and former Microsoft executives and others, this may be the beginning of the end for Microsoft Advertising.

“They are irrelevant,” says a digital media recruiter. “All I have is resumes from Microsoft ad execs looking to get out.”

“They shouldn’t be in the business,” agrees a former Microsoft ad executive.

“If I were a betting man, I’d say they’re out of the business within a year or a year and a half,” predicts a top buyer.

Within Microsoft, management emphatically denies any wish to exit advertising—though the online ad group lost $8 billion last fiscal year, for a company whose total revenue topped $73 billion. In fact, those in the Microsoft Advertising unit make the boldest of claims: With the launch of highly anticipated Windows 8 software (due Oct. 26), they maintain Microsoft will accomplish nothing less than a reinvention of computing, the Internet and the online ad business.

Can a company with this history really pull that off? “We are absolutely committed,” says Frank Holland, vp of the company’s advertising and online business. “We are very serious about advertising.”

What about the executive bloodletting and retrenchment? “This is simply refocus,” says Rik van der Kooi, vp of Microsoft Advertising Business Group, who calls the recent maneuvers “loose, disconnected events.”

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