Microsoft’s Latest Acquisition Is a Well-Aimed Jab at Amazon

Competition for cloud-based services is heating up

microsoft and promoteiq logos
It's a move that takes the tech giant another step forward into the retail space. PromoteIQ

In a move that inches it further into the Amazon-dominated world of online retail, Microsoft has acquired marketing tech startup PromoteIQ, a New York-based company that helps major brands and sellers diversify their ecommerce offerings.

PromoteIQ allows brand-centric buyers to measure analytics and track their campaigns across these sites rather than relying on external ad networks. It’s a pitch that’s drawn $6.5 million in private funding, along with the attention of household names including P&G, Unilever, Kraft and, now, Microsoft.

Formerly called Spotfront, PromoteIQ brands itself as a software as a service (SaaS) platform that lets media buyers working with a particular brand run native ads embedded alongside the organic content of e-commerce sites—including Target, Walmart and, naturally, Amazon.

Similar to the real-time bidding that’s formed the backbone of programmatic advertising in display for roughly a decade, PromoteIQ’s tech allows brands and agencies to bid on the ad slots through an auction-based system. Take Kroger, one of the company’s partnering publishers, as an example: Media buyers can bid on having their content promoted among consumer-facing search results, paying anywhere from 25 cents to $3 on a CPC basis.

It’s a system that, at first blush, appears nearly identical to the auctions used to buy Amazon’s Product Display inventory—PromoteIQ’s founders even directly compared the two in a 2017 interview. Microsoft has been progressively flirting with the retail market, and with it an Amazon rivalry.

“Microsoft’s had their hands in a lot of different pots over the years, but they’ve always been big on retail,” said Andrew Lipsman, an analyst at eMarketer who focuses on ecommerce. “We’ve seen them innovate a lot of technology for store shelves, so this could be a big long-term opportunity to convert in-store actions into online returns.”

The tech company teamed up with Kroger earlier this year, rolling out a connected store concept harnessing Microsoft’s cloud technology to retain data generated by in-store customers. Meanwhile, that same cloud was the subject of a five-year deal inked between Microsoft and Walmart last year, with the retailer looking to harness AI for internal projects and consumer-focused IoT gadgets.

“Everyone’s trying to chase the growth in Amazon advertising,” Lipsman said. “Retailers know that they’re onto a really high-margin revenue stream, and something that’s even a small percentage of overall revenue can completely change the margin profile of the company.”

Retailers have reason to worry about their bottom lines. By the end of 2019, Amazon is set to swallow more than 52% of the ecommerce market, nabbing roughly $317 billion in the process per eMarketer’s estimates. What we’re seeing between Microsoft and Amazon right now, Lipsman explained, is a race to create tech that retailers can use to get the most bang for their buck.

As retailers move toward leveraging more and more of their in-house data, one of the biggest tech booms is coming from the cloud—which, ironically, is also at Amazon’s mercy through the company’s AWS platform. But, as Lipsman pointed out, retailers are right to be wary of using the service, especially when its funds are being funneled back to their direct competition. 

“There’s a big opportunity for someone to be the anti-Amazon here,” he said, adding that given Microsoft’s own Azure cloud service and burgeoning retail-based tech, it seems to be the best candidate for the job.

@swodinsky Shoshana Wodinsky is Adweek's platforms reporter, where she covers the financial and societal impacts of major social networks. She was previously a tech reporter for The Verge and NBC News.