Could Microsoft and AOL Take on Google and Facebook?

With the recent deal between AOL and Microsoft, the two companies hope to combine their respective strengths to become an advertising supernova.

AOL will take over the management and sales of display, mobile and video ads on Microsoft ads around the world. In exchange, Microsoft’s Bing will displace Google as the engine powering the search results and ads on AOL’s sites. That isn’t expected to roll out until January, though the two companies have already started training one another on their respective strategies.

“Every sales team has their own culture; it’s really about trying to combine the cultures and establish a new one,” says Jim Norton, global head of media sales at AOL Advertising. “Combining the best of AOL with the best of Microsoft will give us scale and allow us to compete at the Google and Facebook level.”

According to comScore’s most recent analysis of the desktop searches in the U.S., Google maintains a 64 percent share, compared with Microsoft’s 20 percent. When AOL properties switch search engines, that number could shift. Yahoo saw a massive jump in its share after replacing Google as the default search engine on Mozilla’s Firefox browser last year.

AOL’s famous barbell strategy, which chief executive (CEO) Tim Armstrong coined to refer to connecting programmatic advertising and marketing services with data and analytics, applies to this integration. Working with brands on products such as Skype and Xbox, Microsoft’s sales strategy tends to be very content-based, while AOL is very strong programmatically.

“[Microsoft’s] content sales acumen married with our programmatic sales acumen should produce great children,” Norton says. “You’ve got to be able to straddle both sides of the business.”

That programmatic acumen extends to TV as well. At the AOL Open Series Tuesday morning, Dan Ackerman, the company’s head of programmatic TV, released a report that said linear TV viewing dropped 9 percent during Q1, with nearly half of that drop attributed to Netflix. As a result, Ackerman said it’s increasingly important for advertisers to harness data and automation.

The report also revealed that from 2012 through 2015, linear TV ad impressions grew an average of 0.9 percent year-over-year, and the average cost-per-thousand (CPM) of a TV ad increased by 29 percent. Due to the increased prices, advertiser value per TV ad dollar is declining, according to the report.

“We’ve seen the transition from 60 seconds to 30 seconds to 15 seconds, which means consumers today are exposed to more ad messages. This is a big change for viewers’ TV experience.” Ackerman explained. “Now we have more ads, less TV content and less engaging audiences. It’s really hard to capture TV’s impact.

“But TV opportunities are still incredible. Our ad model needs to catch up,” he added.

To catch up, Ackerman recommends that instead of buying TV time against general demographics, a retailer collaborate with an agency or a programmatic TV provider and use its first-party data to customize a TV-buying plan that will find a defined audience across different forms of TV.

“Programmatic TV is really here today. We believe that 60 percent of brands will apply programmatic to broadcast TV by 2016,” he said.