Q&A: Nikhil Kolar, vp Microsoft AI scales its ‘click-to-sign’ publisher AI content marketplace

Business Insider Inc, Vox Media Inc, USA Today Co., People Inc, The Associated Press, Hearst Magazines, and Condé Nast are the first wave of publisher pilot partners. But the goal is to start expanding to more publishers and demand partners — aka LLMs and any AI builders — both in the U.S. and internationally.

Digiday spoke with Nikhil Kolar, vp at Microsoft AI, about how the company is working with publishers to determine pricing models that would have AI builders pay based on the demonstrated value of publishers’ source material, the long-term ambitions and challenges in creating a marketplace that’s sustainable for publishers and scalable across AI builders.

This conversation has been lightly edited for clarity and flow. 

What instigated setting up a marketplace like this, rather than negotiating individual licensing deals with publishers?

Last year, we saw companies were going through a similar process where each of these answer engines was talking to publishers, trying to figure out what a good way to do this was, and negotiating with them for months on end, sometimes. There’s a lot of friction in this. There was low trust associated with it, and it was not a scalable way to do it. So the question we asked ourselves was: what is a low-friction, high-trust, scalable way to make content available for AI engines and a way for content publishers to get compensated for the premium content? And that’s where the idea of this content marketplace came about.

Microsoft is now naming publisher partners and expanding the pilot — what’s materially different about this phase of the marketplace compared to when you first started to codesign it?

The first phase was twofold: get the pipes working — how does the content come in, and how do we ensure the content that comes in is available to be licensed. Sometimes, the publishers may not have a license for the whole piece of content that they have published. The image might be licensed from somewhere else and so on. And so, how do we allow them to clean up the content so it can flow through the system that we have: Microsoft has first-party demand with our copilots, and the M365 copilot from the enterprise side, and the MAI copilot from the consumer side. Also we wanted to build a feedback loop from the demand side on how the content was used, because publishers also want to know that. It’s not just: ‘hey, I want to be paid for my premium content,’ but also, ‘how is my content being used? So I have more insights into what I need to do differently.’ And so we built the feedback loops, and now the pipes are flowing.

And the second part? 

That was to codesign the whole system. Publishers have been very generous, working with us shoulder to shoulder, to work out what might be a common contract that most publishers will be comfortable with. Because it needs to be a low-friction, scalable, high-trust way of getting things done, and it won’t be if every publisher that comes on board has to spend three months negotiating a contract. Maybe a click-to-sign contract. We did that with MSN in the past; every contract had to be negotiated, then we made it click-to-sign and we have 18,000 brands now — we are taking the same playbook here. So we had to work with the publishers to figure out: what are the usage rights, what would they be comfortable with, what are the parameters that they would want control over, what kind of encumbrances will they want to express, how would the content flow into the system, what feedback will publishers want?

So the pricing structure and contracts have been standardized, rather than negotiated individually with publishers? 

Not yet. With the pilot, we did individual negotiations with the publishers. But anything further, we’re expecting to be the standardized contract, but we’ve not finalized it yet, we’re working through it, and hopefully will have that in place. 

Some of the larger partners we work with already have a licensing deal. So one of the things we’re building into the marketplace is this concept of bring-your-own-license. If you as a publisher, have already negotiated pricing for your content… we’re saying that the content marketplace can become the infrastructure to deliver any license that you have negotiated outside the marketplace. So that’s an additional value to anyone who works in the content marketplace, where in addition to getting paid, getting analytics, being a high-trust low friction scalable way of getting things done, it can be the one place you can go to get all the content you want. And we want this content to be not just news publishers or magazines, but any source of content or content pool out there. Then it’s a spectrum of content that is available in the marketplace, made available to the demand side and not just the large AI players but any AI builder. Anyone building an agent. And it can be used on Azure. That’s the vision. 

Will you be extending that group of pilot publishers yet?

We are actually starting to expand these conversations now beyond the U.S. You can imagine, in Europe, the contracts might need to be slightly different, so how do we account for that? So we’re starting to talk to our European publishers now and ask: ‘Are you willing to participate and help codesign that?’ And we’re also talking to their ecosystem partners. We’ve talked to the IAB Tech Lab and other peer groups and they’re all interested in working together. It’s not just Microsoft doing this, but Microsoft in partnership with the stakeholders.

Long term, is this intended to function like a broader ecosystem marketplace — like an AdX for licensing — or is it primarily a content access mechanism for Azure?

It’s a content access mechanism for anyone. We would love for everyone in the world to be on Azure, but we also recognize that not everyone has an Azure, but they still have a need for this [marketplace].

Can you talk through how the pricing works today? Are publishers paid based on usage — per query, per token or some other model? 

We’re working through all those business models now and using guiding principles to figure out what the pricing model should be. We’ve started by saying pay for demonstrated value. Sometimes, the value may be: ‘I just need to know the score.’ In some cases, the value will be associated with a particular source — it’s not substitutable — it might be a high-consideration decision for me, and I’m willing to pay a lot more for it as a demand partner. So the value is very different. That’s why we’re starting with pay for demonstrated value.

At the same time, if we want this to be scalable, then we need to keep it consistent in some way, so that the demand knows how much they will end up having to pay for it. But it’s currently extremely complex, so some simplicity has to come in. We’re working through a number of these different experiments and what we launch may not be what we end up with. But we have seen that without access to premium content versus access to premium content, we see a marked improvement in the customer success, or session success, number of clicks and citations that you get. So we’ll be running these experiments and keep tuning the model until we have arrived at something that works for the whole marketplace, all the stakeholders.

What’s the biggest obstacle to scaling this today and how do you plan to move forward with it?

It’s the complexity of the whole thing. You have publishers and content providers of different sizes with different needs across multiple geographies, languages, countries and regulations. You have demand partners that are very large right through to those that are very small that might have different capabilities, different levels of comfort with how much they would pay for what kind of content. Each one will have their own calculus based on how much revenue they generate. And so the marketplace needs to be able to adapt and scale across these complexities.

So without getting overwhelmed, we need to start taking the next best step in terms of designing the marketplace where we bring in some publishers, bring in first-party Copilot demand, run and see how it works. Then we’ll start expanding the publishers, then we’ll start expanding the demand partners. And as we bring in each new player, the equilibrium of the marketplace changes, and so we need to get to a new equilibrium, learn from that, and then expand, and then expand. It will take a bit of time to do it, but we know to start now rather than wait for another year.