Microsoft looks set to shutter its retail media business

While it isn’t promoting the move as an outright closure of PromoteIQ, the underlying understanding is that the service will no longer be used, and employees at the company have been told that Microsoft is focusing on other parts of its retail media strategy.

In 2019, Microsoft acquired PromoteIQ for an undisclosed amount of money. It was pitched as a way to connect publishers with retail advertisers trying to run ads from their product catalogs. Already, PromoteIQ had some high-profile clients, including Kroger and Home Depot.

Indeed, that was likely one of the reasons Microsoft opted to purchase the startup. According to PromoteIQ’s former chief revenue officer Harsh Jiandani, before the acquisition happened in 2019, both Microsoft and PromoteIQ were trying to woo Kroger to use their platforms for advertising technology. Kroger ultimately decided to use PromoteIQ, which is what prompted Microsoft to scoop it up.

“At that point, they were like, let’s just buy them,” Jiandani said. Jiandani left PromoteIQ in 2023 and is now the chief commercial officer at the advertising technology platform Koddi.

Cross-selling for Azure services?

The idea behind the acquisition, he said, “was that, more and more, the decisions of which cloud to utilize are influenced by the advertising or the marketing sides of the business.” That is, if Microsoft can get retailers and advertisers to use its retail media tech stack, the technology giant could cross-sell the rest of its cloud services.

For some time, things seemed to be smooth sailing. In addition to inking big names like Kroger, PromoteIQ brought on other retailers like Hudson’s Bay and Sephora to use the technology to build out retail media capabilities, according to Jiandani. “We had a huge stream of wins and the revenue was increasing,” he said. 

But, according to Jiandani, over the years, Microsoft began to realize something: “PromoteIQ’s ad server business operates on very low margins.” And Microsoft was trying to finesse the business to be higher-margin on the advertising side. 

“They just looked at the general profitability of the business,” he said, and “[realized] it was going to be a while until you get to $1 billion [in revenue].”

Meanwhile, Microsoft began to lose some bigger clients. Kroger, for example, announced in July 2023 that it was bringing its retail media ad tech in-house.

According to Jiandani, this ultimately led Microsoft to change its retail media strategy. It began laying off more PromoteIQ employees and made plans to offload its in-house technology. Instead of using its own PromoteIQ services to handle the inventory, the company would send it to an external partner.

According to Jiandani, when he joined Koddi in 2023, he personally reached out to Microsoft about being such an ad tech partner. “But they went and did the same deal with Criteo,” he said. 

A tie-up with Criteo

The deal would see Microsoft Advertising bring its advertiser demand to Criteo’s network of publishers. Sources with knowledge of the developments told Digiday that the relationship is in its early stages and not expected to generate significant revenues until 2025. 

The July announcement read, “Microsoft Advertising also intends to work with Criteo as its preferred onsite media partner, extending Criteo’s monetization technology to Microsoft Advertising’s retailer clients, creating an even more unified retail media ecosystem.” 

The wording of the announcement did not mention a closure of PromoteIQ, but separate sources told Digiday such conversations were had at this year’s Dmexco conference in September. 

One source, who similarly requested anonymity due to commercial sensitivities, told Digiday that parties within Microsoft had briefed them about the business change and push to Criteo. They said that retailers voiced disquiet at what they perceived as an unwelcome migration. 

A separate source claimed the moves would involve layoffs at PromoteIQ and that the migration process would take up to a year. However, PromoteIQ’s existing customers wouldn’t necessarily have to work with Criteo.  

“It’s more of a warm intro, with a nudge that Criteo will have access to Microsoft Advertising demand,” noted one retail media source who also requested anonymity as their employer would likely pitch for any retailers looking to stray from the Microsft Advertising fold.

Representatives of Microsoft’s advertising division did not respond to multiple requests for comment by press time. Meanwhile, a Criteo spokesperson noted its policy not to “comment on other companies or partners.” 

A source with direct knowledge of Criteo’s priorities noted that the partnership with Microsoft will be a core area of focus for the France-headquartered company in 2025, even if Google’s delayed cookie depreciation provided its ad retargeting business with something of a reprieve.  

Meanwhile, separate sources note that it is not expected to contribute significantly to its bottom line for another 12 months, even as its product team held significant development meetings with Microsoft Advertising’s retail media team over the summer.  

A dynamic space

The move from Microsoft is indicative of how dynamic the overall space is. “We’re pretty much in the second or third inning in the evolution of retail media networks,” said Jason Goldberg, chief commerce strategy officer at Publicis Groupe. “It’s really hard to predict what tools various stakeholders will need and which ones will gain traction.”

As Goldberg sees it, the players building out their networks need to see the services they offer in concert with their overall offering. That is, a company like Microsoft shouldn’t expect each arm of its retail media business to be a high-margin business, but necessary to build the company’s overall momentum in the space. “If you want to be a player in the tech stack space, you have to be committed to evolving rapidly and developing new capabilities and integrations,” he said. “You can’t necessarily expect huge scale or huge volume on any one integration.”

In a July 30 blog post, MoLoCo’s Nikhil Raj, vp of business and retail media, noted the lessons learned from PromoteIQ’s journey, dubbing it a “wake-up call” for the sector as it developed. 

“Recently, PromoteIQ has been best known for its access to the Microsoft Audience Network (Microsoft Search, Video extensions) and offsite capabilities such as Xandr,” he wrote. “The shutdown highlights at least two key lessons: first, a ‘built-in demand’ centric product struggles to override legacy technology. Second, retailers need to build resilient, ‘owned’ architectures to prevent the future risk of being ‘de-platformed’ which is always a risk when part of a larger ecosystem.” 

Separately, Paul Childs, an executive with extensive experience in the retail media sector who currently serves as vp of global sales at Appodeal, noted how this emerging industry sector is unlike traditional ad tech for several reasons. 

“[There are] different target customers and gatekeepers, and it’s an enterprise sales process requiring ad tech folk to think completely differently,” he told Digiday, adding that other challenges include “lack of retailer internal ad tech domain expertise and resources to support or prioritize  integration.”