Microsoft’s Satya Nadella uses a subtle fear tactic to win cloud business away from Amazon

Microsoft CEO Satya Nadella

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Microsoft CEO Satya Nadella
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Flickr/Kmeron

Advertising agency giant WPP has been a partner with Microsoft for years.

So when it came time to meet and pitch WPP’s new CEO, Mark Read, appointed last September, Microsoft brought out the big gun: Microsoft CEO Satya Nadella.

Flanked by about 20 people from each of their organizations, Nadella marched straight up to Read the moment introductions were over, reports Businessweek’s Austin Carr and Dina Bass as part of a profile on Nadella.

He politely listened to Read talk about WPP’s digital needs for nearly a quarter of an hour before gently saying, “We don’t want you to think of this as just building an app on our platform. We want to enable you to build your own platform.”

The words were a code.

Nadella was reminding Read that unlike giant cloud provider Amazon, Microsoft isn’t competing with WPP. It isn’t a retailer competing with WPP’s customer’s either. And although it does have Bing and does sell ads, it also has an ad sales partnership with WPP.

Nadella’s sales pitch is simple, and one used not just with ad agency giant WPP but with retailers, an industry Amazon has really clobbered: Do you trust a technology partner to store their data, handle their transactions, know the most intimate details of their business, if that tech partner is also a competitor?

Read: Microsoft, VMware, and Dell officially launched a new partnership that shouldn’t please Amazon

This fear is one of the reasons why major retailers like Walmart and Kroger have chosen Microsoft over Amazon. And Microsoft isn’t alone in using it. Google’s cloud has deliberately gone after the retail market as well, with the same argument.

The message wasn’t lost on Read, Businessweek reports.

WPP’s famous billionaire founder Martin Sorrell (who resigned last year over allegations of personal misconduct leading to Read’s promotion as CEO), spent much of last year warning the world that Amazon’s advertising business was underestimated.

He called Amazon names like “tentacles” and said its advertising business was a growing “pimple” or “boil”in various interviews.

WPP began offering brands creative services to help them advertise on Amazon back in 2017. And, like he predicted, Amazon’s advertising business has been growing.

He saw it as a direct threat to Google and Facebook but also one to WPP, admitting that Amazon “kept him up at night.” That’s because digital ad companies like Google, Facebook and Amazon all have their own enormous sales forces and work with brands directly, cutting out the need for creative agency.

mark read

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Amazon is also working to build out its ad sales force. It’s currently looking to hire nearly 1,700 people for advertising sales jobs, according to its website.

Nadella’s fear tactic clearly doesn’t work on everyone. Amazon remains the market share leader in cloud, with plenty of companies, especially outside of retail, choosing AWS.

Ironically, one of Amazon’s Web Services biggest customers is Netflix. It began using Amazon back before Amazon began competing with it.

This even though, as Bloomberg reveals, Netflix’s co-founder and CEO Reed Hastings was Nadella’s mentor back when Hastings was a Microsoft board member. Hastings left the board in 2012. And despite his close relationship with Nadella, and the fact that Amazon now has its own movie studio and streaming services, it has yet to ditch AWS for Azure.

Still, Amazon’s willingness to compete with its partners and customers could be AWS’s achilles heel and one that Nadella seems ready to exploit.