Under the deal, AOL will use Bing to power search through its website, and will operate display advertising, including mobile and video ads, for Microsoft's portfolio in Brazil, Canada, France, Germany, Italy, Japan, Spain, U.K. and the U.S. That means AOL will be powering all the display ads that run in those countries, including on MSN, Xbox, Outlook.com and Skype.
Moving those components of Microsoft's display ad business to AOL could make advertising with the software giant a more enticing option for businesses. Under the new partnership, companies can work with AOL to get their advertisements placed across sites like Huffington Post, Engadget and MSN. Previously, advertisers would have needed to reach out to both companies in order to get similar reach.
The financial terms of the deal between the two companies was unclear. As part of the deal, Microsoft will be transferring its sales and trade marketing employees to AOL. The company declined to comment on the number of employees impacted, but a report by Bloomberg claimed that the deal will affect about 1,200 people. Microsoft continues to operate its display advertising business in markets not included in the deal with AOL.
The search deal is a win for Microsoft, since AOL previously relied on Google to provide its search results. With the partnership, Microsoft will once again expand the reach of its search engine, though it's not clear how many more users the company will gain. Bing also helps power Yahoo's search efforts, thanks to a recently-revised alliance between the two companies.
In addition to its partnership with AOL, Microsoft also expanded its partnership with AppNexus to provide programmatic advertising sales across its search and display ad businesses in Austria, Belgium, Denmark, Finland, Ireland, the Netherlands, Norway, Portugal, Sweden and Switzerland.
Although this is a significant shift for Microsoft, it doesn't mean that the company is getting out of running its advertising business entirely -- quite the contrary. Search advertising through Bing has grown, and the search engine is profitable on its own, according to a report by Search Engine Land. Contrast that with Microsoft's display business, which was frequently listed in the company's financial reports as something that offset gains made by its other businesses.
A company spokeswoman said in an emailed statement that the news is part of Microsoft's overall push to refocus on its core businesses under CEO Satya Nadella.
"Today's news is evidence of Microsoft's increased focus on our strengths: in this case, search and search advertising and building great content and consumer services," she said. "This evolution in our approach to display advertising allows us to keep this focus, while working with industry leaders to market our services."
Last week, Nadella said in a companywide email that Microsoft needed to "make some tough choices in areas where things are not working," and it seems display advertising fits the bill. With the AOL deal, Microsoft seems to get a fairly positive outcome: it no longer has to worry about building out its own display ad network in the affected markets, but can still leverage ads to monetize its free services like Outlook.com.
All this comes the same day that Microsoft revealed it was transferring around 100 engineers and technology used by Bing Maps to Uber as part of a shift away from collecting its own imagery and data for the mapping service.