Microsoft Advertising and Epsilon bring precision targeting to search campaigns

Microsoft Advertising announced on January 7, 2026, at CES in Las Vegas that Epsilon data has become available on the Microsoft Advertising Platform through a collaboration with Publicis Media Exchange. The partnership, designated Third-Party Search, combines Microsoft's search advertising infrastructure with Epsilon's consumer identity data and PMX's strategic activation expertise to deliver what the companies characterize as a first-of-its-kind approach to audience targeting across search, native, and display inventory.

The integration enables advertisers to activate Epsilon's consumer insights directly within Microsoft's advertising ecosystem. Epsilon, acquired by Publicis Groupe on July 2, 2019, for $3.95 billion after tax step-up, operates as the holding company's core data technology platform with identity resolution capabilities spanning billions of consumer records.

According to the announcement by Russ Lynn, Agency Director North America at Microsoft Advertising, and Edgar Rodriguez, SVP Partner Management at Epsilon, the collaboration delivers "a new, first-of-its-kind approach to audience solutions that outperform traditional targeting models." The system leverages Epsilon's consumer data to identify high-value audiences across Microsoft's advertising inventory with what the companies describe as unprecedented accuracy and scale.

Early testing demonstrates substantial performance improvements over conventional targeting approaches. A pilot campaign in the travel vertical achieved two times higher return on ad spend compared to traditional in-market audiences. The same campaign identified 42 percent net-new targetable audience, converting travelers not previously reached through other first-party audience segments.

Technical infrastructure and data integration

The Third-Party Search framework operates by integrating Epsilon's proprietary identity data with Microsoft Advertising Platform's targeting capabilities. Epsilon maintains comprehensive consumer profiles derived from multiple data sources including purchase history, demographic information, lifestyle indicators, and behavioral signals across digital and offline channels.

Microsoft's advertising ecosystem encompasses search inventory on Bing, native advertising placements across MSN and Microsoft Start, and display inventory distributed through Microsoft Audience Network. The platform serves advertisements across desktop, mobile, and connected television environments, reaching what Microsoft characterizes as hundreds of millions of monthly active users.

Epsilon's data infrastructure relies on COREid, the company's proprietary identity resolution technology that links consumer records across devices, browsers, and platforms. This system creates persistent identifiers that enable advertisers to recognize and target specific consumer segments even as individuals move between environments and devices.

The integration maintains privacy compliance through what the companies describe as secure data handling protocols. Epsilon's identity graph operates under privacy frameworks including CCPA, GDPR, and industry self-regulatory guidelines, according to the company's technical documentation. The system applies data governance controls that restrict access to individual-level information while enabling aggregate audience targeting.

Travel pilot campaign results and methodology

The travel vertical pilot campaign provides concrete performance metrics demonstrating the integration's capabilities. The test compared campaigns using Epsilon-powered targeting against traditional in-market audience segments, which typically rely on behavioral signals like search query patterns, website visits, and content consumption related to travel categories.

The 42 percent net-new audience metric indicates Epsilon's data identified travelers that Microsoft's standard audience signals had not flagged as high-intent prospects. This expansion suggests Epsilon's offline purchase data, loyalty program information, and cross-channel behavioral tracking captures consumer segments that search behavior alone misses.

The two times higher ROAS improvement represents substantial efficiency gains. If a baseline campaign generated $2 in revenue for every $1 spent, the Epsilon-enhanced targeting would deliver $4 in revenue per advertising dollar. The announcement attributed these results to "significant efficiency gains and bookings," though specific booking volume data was not disclosed.

Travel advertising represents a particularly valuable test case for precision targeting capabilities. The vertical involves high consideration purchases with long planning cycles, multiple research touchpoints, and significant price sensitivity. Travelers frequently research destinations, compare pricing across multiple dates and routes, and consume substantial content before converting. Epsilon's data potentially identifies consumers based on historical travel patterns, credit card spending in travel categories, and loyalty program participation that search queries alone would not surface.

Industry context and competitive positioning

The Microsoft-Epsilon integration arrives as search advertising faces attribution challenges from AI-powered answer engines. Google's implementation of AI Overviews and Gemini-powered search features has created traffic concerns for publishers and advertisers, with some reports indicating substantial declines in click-through rates from search results pages to destination websites.

Microsoft has positioned Bing as an AI-native search experience since integrating ChatGPT-powered features in February 2023. The company's approach emphasizes conversational search interactions and direct answers within the search interface, potentially reducing traditional advertising inventory visibility. Third-party data integration may help compensate for reduced search signal quality as AI features alter user behavior patterns.

Epsilon has expanded partnerships across major advertising platforms, including integrations with Pinterest, Amazon DSP, and programmatic exchanges. The company's March 16, 2024, partnership with Proximic by Comscore added contextual data capabilities, enabling advertisers to combine identity-based targeting with content adjacency controls.

Publicis Groupe has invested heavily in identity resolution capabilities following the Epsilon acquisition. The company announced plans to acquire Lotame in March 2025, combining Epsilon's 250 million consumer profiles with Lotame's 2.3 billion global identifiers. These acquisitions position Publicis Media Exchange as a significant data intermediary capable of activating proprietary identity assets across multiple advertising platforms.

Clean room technology has emerged as critical infrastructure for secure data collaboration in advertising. Epsilon operates clean room environments that enable advertisers to combine first-party data with Epsilon's proprietary datasets without exposing individual customer records. The Microsoft integration likely operates through similar privacy-preserving architecture, though technical implementation details were not disclosed in the announcement.

Publicis Media Exchange activation strategy

Publicis Media Exchange serves as the strategic activation layer connecting Epsilon's data capabilities with Microsoft's advertising inventory. PMX operates as Publicis Media's programmatic trading desk and audience management platform, executing campaigns across display, video, native, audio, and connected television channels for holding company agencies including Zenith, Starcom, Spark Foundry, and Blue 449.

The collaboration positions PMX clients with exclusive early access to Epsilon-powered Microsoft audiences. This arrangement creates competitive differentiation for Publicis Media agencies in new business pitches and client retention, particularly for categories where precision targeting drives substantial performance improvements.

PMX has established direct integrations with major advertising platforms including Google Display & Video 360, Amazon DSP, The Trade Desk, and Yahoo DSP. The Microsoft-Epsilon partnership extends this portfolio with identity-enriched search targeting capabilities that competitors cannot replicate without similar first-party data partnerships.

The travel pilot campaign methodology suggests PMX played an active role in audience strategy and campaign execution rather than simply providing media buying services. The 42 percent net-new audience finding indicates PMX worked with the client to map existing audience segments, identify coverage gaps, and test Epsilon data's incremental reach. This consultative approach positions PMX as a strategic partner rather than a commodity media buyer.

Data partnership economics and market dynamics

Third-party data partnerships typically involve cost-per-thousand-impression fees charged when advertisers activate external audience segments. Industry standard third-party data CPMs range from $0.75 to $2.50 depending on data provider, audience segment specificity, and vertical category, according to Microsoft Advertising's published rate cards.

Premium identity-based segments command higher CPMs than behavioral or contextual targeting alternatives. Epsilon's proprietary consumer data, derived from credit card transactions, loyalty programs, and direct customer relationships, represents higher-value inventory than inferred behavioral signals. The travel pilot's two times ROAS improvement would justify substantial data costs if those fees remained below 50 percent of the efficiency gains.

Microsoft benefits from the partnership through increased advertiser spending on its platform and potential user data enhancement. Search query logs, click behavior, and conversion patterns from Epsilon-targeted campaigns provide training data for Microsoft's own audience modeling systems. Over time, these signals could improve Microsoft's native audience products even for advertisers not purchasing Epsilon data.

Publicis Media Exchange captures value through improved campaign performance that strengthens client relationships and potentially justifies higher agency fees or performance bonuses. The holding company's ownership of Epsilon creates structural incentive to drive data adoption across Publicis Media clients, with increased Epsilon revenue flowing to the parent company regardless of which agency entity executes campaigns.

The competitive dynamics disadvantage independent agencies and advertisers working outside Publicis Media. While Epsilon theoretically makes data available through multiple distribution channels, the Microsoft integration announcement emphasizes PMX's strategic role and does not specify whether non-Publicis advertisers can access Epsilon audiences on Microsoft Advertising Platform through other agency partners or direct relationships.

Audience targeting evolution and privacy considerations

The Third-Party Search collaboration represents broader industry movement toward identity-based targeting as traditional signal sources degrade. Browser restrictions on third-party cookies, Apple's App Tracking Transparency framework, and privacy regulations have reduced advertisers' ability to track users across websites and applications without explicit consent.

Search advertising historically relied on query-based targeting and website visitation signals captured through platform pixels. A user searching for "Hawaii vacation packages" demonstrates clear commercial intent without requiring cross-site tracking. However, query volume represents only a fraction of potential customers. Many consumers research travel through social media, read review sites, and consume video content without generating search queries that advertisers can target.

Epsilon's data enables Microsoft to reach these consumers based on offline indicators like credit card spending at airlines, hotel loyalty program enrollment, or previous travel booking patterns captured through Epsilon's retail and financial services partnerships. This approach extends search advertising's addressable market beyond users actively generating platform signals.

Privacy advocates have questioned whether such data practices genuinely protect consumer interests. The Federal Trade Commission warned on November 13, 2024, that data clean rooms present "complicated privacy implications" despite marketing claims emphasizing privacy protection. The FTC noted that clean rooms enable data sharing between companies that consumers might not expect, even when individual-level records remain encrypted.

Epsilon's data collection practices rely on consumer relationships with brands, retailers, and financial institutions that may not have explicitly disclosed advertising uses. Credit card issuers typically include data sharing provisions in terms of service agreements, but consumers rarely understand how transaction histories inform advertising targeting. The degree to which Epsilon's data practices align with consumer privacy expectations remains subject to ongoing regulatory scrutiny.

Implementation and availability

The announcement did not specify commercial availability timelines for Microsoft Advertising clients beyond Publicis Media Exchange. Microsoft Advertising typically deploys new features through phased rollouts, beginning with beta testing among select advertisers before general availability.

Advertisers seeking to activate Epsilon data on Microsoft Advertising Platform would need to establish commercial relationships with both Microsoft and Epsilon, negotiate data licensing terms, and complete technical integration requirements. For Publicis Media clients, PMX handles these operational complexities as part of standard media buying services.

Microsoft Advertising Platform provides self-service and managed service options for campaign execution. Self-service advertisers access the platform through Microsoft Advertising web interface, where they can create campaigns, select targeting parameters, set bids, and monitor performance. Managed service clients work with Microsoft account teams who provide strategic guidance and hands-on campaign optimization.

The travel pilot campaign's success metrics will influence adoption patterns across other vertical categories. Travel advertising's strong results may not translate directly to retail, automotive, financial services, or other sectors with different customer journey patterns and conversion behaviors. Advertisers in these categories would need to conduct their own testing to validate Epsilon data's effectiveness for their specific use cases.

Microsoft has historically positioned itself as a privacy-forward alternative to Google's advertising ecosystem, emphasizing user control and data transparency. The Epsilon partnership introduces third-party data elements that complicate this positioning, potentially creating tension with Microsoft's stated privacy commitments. How Microsoft communicates data usage policies to consumers and advertisers will influence perception of the partnership's privacy implications.

Implications for search advertising ecosystem

The Microsoft-Epsilon integration demonstrates how platform-data provider partnerships reshape competitive dynamics in search advertising. Google maintains proprietary user data from Chrome browser usage, Android device data, Google Maps location tracking, YouTube viewing behavior, and Gmail engagement signals. This integrated data ecosystem enables sophisticated audience targeting that Microsoft historically could not match using Bing search signals alone.

By partnering with Epsilon, Microsoft gains access to consumer identity data that partially compensates for its smaller user base and limited first-party data assets. However, the partnership structure creates dependencies that Google avoids through vertical integration. Microsoft must share revenue with Epsilon and relies on a third party for critical targeting capabilities rather than controlling the entire data infrastructure.

Google has faced regulatory pressure to limit data integration across its properties, particularly in Europe where competition authorities have questioned whether combining user data from multiple services creates unfair competitive advantages. Microsoft's partnership model might face less regulatory scrutiny because data combination occurs through commercial agreements rather than single-company data aggregation.

The search advertising market has experienced substantial consolidation in recent years, with Google controlling approximately 90 percent of global search advertising revenue. Microsoft's Bing accounts for roughly 3 percent market share in the United States, limiting its ability to invest in data infrastructure at Google's scale. Strategic partnerships with data providers like Epsilon represent a viable alternative strategy that leverages external assets rather than attempting to build competitive capabilities organically.

Advertiser response to the Third-Party Search collaboration will depend on whether Epsilon-enhanced targeting delivers consistent performance improvements across diverse campaign types and whether data costs remain justified by efficiency gains. The travel pilot's strong results provide encouraging initial evidence, but sustained adoption requires proof that benefits extend beyond single-vertical testing environments.

Timeline

• July 2, 2019: Publicis Groupe finalizes Epsilon acquisition for $3.95 billion, establishing data technology platform
• February 2023: Microsoft integrates ChatGPT-powered features into Bing search, launching AI-native search experience
• March 16, 2024: Epsilon partners with Proximic by Comscore for enhanced contextual data solutions
• November 13, 2024: FTC warns data clean rooms present complicated privacy implications despite marketing claims
• December 4, 2024: Microsoft Advertising launches automated order insertion with Mediaocean involving PMX in development process
• March 2025: Publicis announces Lotame acquisition combining 2.3 billion global profiles with Epsilon data
• November 5, 2025: Pinterest integrates Epsilon Clean Room for direct audience activation with improved match rates
• January 7, 2026: Microsoft Advertising, PMX, and Epsilon announce Third-Party Search collaboration at CES, demonstrating 2x higher ROAS in travel pilot

Summary

Who: Microsoft Advertising partnered with Publicis Media Exchange and Epsilon to launch Third-Party Search, a data integration enabling precision audience targeting. Russ Lynn, Agency Director North America at Microsoft Advertising, and Edgar Rodriguez, SVP Partner Management at Epsilon, announced the collaboration. Publicis Groupe owns Epsilon following a $3.95 billion acquisition completed July 2, 2019.

What: The integration makes Epsilon's consumer identity data available on Microsoft Advertising Platform for targeting across search, native, and display inventory. The system combines Microsoft's advertising reach with Epsilon's proprietary consumer insights and PMX's activation expertise. A travel vertical pilot campaign achieved two times higher return on ad spend compared to traditional in-market audiences and identified 42 percent net-new targetable audience not previously reached through other first-party segments.

When: Microsoft Advertising announced the partnership on January 7, 2026, at CES in Las Vegas. The travel pilot campaign preceded the public announcement, though specific testing dates were not disclosed. Commercial availability beyond Publicis Media Exchange clients remains unspecified.

Where: The integration operates within Microsoft Advertising Platform across search inventory on Bing, native placements on MSN and Microsoft Start, and display inventory through Microsoft Audience Network. Epsilon's identity data derives from consumer relationships across retail, financial services, and loyalty programs spanning offline and digital channels. Publicis Media Exchange manages strategic activation for holding company agency clients.

Why: The partnership addresses search advertising's attribution challenges as AI-powered features alter user behavior and reduce traditional signal quality. Identity-based targeting compensates for browser privacy restrictions, third-party cookie deprecation, and app tracking limitations that have degraded behavioral targeting capabilities. Microsoft gains access to consumer data that partially offsets Google's advantages from integrated first-party assets across Chrome, Android, Maps, and YouTube. Epsilon extends data distribution across major advertising platforms. Publicis Media Exchange creates competitive differentiation for client services through exclusive early access to enhanced targeting capabilities.