Microsoft (NASDAQ:MSFT), the world’s largest software maker, will hand will get out of Web display advertising, with AOL (NYSE:AOL) taking over the business, and sell some map-generating technology to ride-hailing app company Uber, as it slims down its money-losing online operations and seeks to focus more on mobile and cloud-based computing.
The moves will help Microsoft focuses on its growing search advertising business based on its Bing search engine, and displaying maps on its Windows devices rather than generating the maps themselves.
Financial terms of the two deals were not disclosed.
"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," the Redmond, Washington-based company said in a statement late yesterday.
Microsoft also said it’s expanding an ad partnership with AppNexus, an online marketing company.
About 1,200 jobs at Microsoft will be affected, with some positions to be moved to AOL and AppNexus, a person with knowledge of the matter told Bloomberg News.
Under a 10-year deal struck with AOL, now a unit of Verizon Communications Inc (VZ.N), AOL will sell display ads on MSN, Outlook.com, Xbox, Skype and in some apps in major countries. As part of the deal, Bing will become the search engine behind web searches on AOL starting next year.
AOL will take over management and sales responsibility for all of Microsoft’s display, mobile and video advertising inventory in the U.S., U.K., Canada, Brazil, France, Germany, Italy, Spain and Japan, according to the statement.
For years Microsoft tried to compete with Google by heavily investing in advertising technology. In a memo to employees last week Microsoft CEO Satya Nadella said the company would have to make some "tough choices" as it focuses on seizing "new growth."
Microsoft unveiled a plan a year ago to eliminate as many 18,000 jobs, the largest round of cuts in its history as Nadella overhauls the software maker.
For AOL and its new parent Verizon, the Microsoft partnership will give it a lot more ad inventory to work with as it tries to become a bigger force in the digital ad industry.