Microsofts aQuantive Buy Shows Big Ad Plans

By Peter Galli  |  Posted 2007-05-18 Print this article Print

Microsoft will pay $6 billion to acquire aQuantive, building its online advertising platform.

Microsoft has announced that it will shell out $6 billion in cash to buy aQuantive, which owns interactive ad agency Avenue A RazorFish, as well as Atlas, a set of advanced tools for advertisers and publishers, and DrivePM, which matches advertiser campaigns with publisher inventory. The motivation for the deal appears simple: Microsoft wants to provide the advertising industry with an Internet-wide advertising platform, as well as a set of tools and services that help its constituents generate the highest possible return on their advertising investments. "The advertising industry is evolving and growing at an incredible pace, moving increasingly toward online and IP-served platforms, which dramatically increases the importance of software for this industry," Steve Ballmer, CEO of Microsoft, based in Redmond, Wash., said May 18.
The aQuantive acquisition represents the next step in the evolution of Microsofts ad network from its initial investment in MSN, to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet, he said.
Click here to read about Microsofts recent acquisition of Tellme Networks. "Microsoft is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximize the digital advertising opportunity for all," Ballmer said. Allan B. Krans, an analyst with Technology Business Research, told eWEEK that aQuantive brings Microsoft a tool set enabling clients to develop, target and execute an online advertising campaign. "By improving its ability to provide a more comprehensive end-to-end ad platform, the company believes it will unlock significant value—several billion dollars worth over the next few years—by helping advertisers identify and take advantage of new ad opportunities. The aQuantive purchase will also provide Microsoft [with] access to a significant client base, which should help the company gain traction on its AdSense platform," Krans said. This acquisition follows hot on the heels of similar moves by other companies. Advertising giant WPP Group is buying 24/7 Real Media for $649 million, while Google announced plans in April to acquire digital advertising company DoubleClick for $3.1 billion, and Yahoo bought the rest of Right Media for $680 million. Google CEO Eric Schmidt has scoffed at antitrust concerns about the DoubleClick deal. Click here to read more. TBRs Krans said Microsofts acquisition of aQuantive will the companys largest ever, and is a departure from its traditional preference for developing core competencies internally. "In the area of online services, Microsoft has clearly determined that it does not have the time to develop a comprehensive ad platform and must make acquisitions to supplement its core AdCenter product," he said. "All the portals are intent on building their ad platforms into comprehensive one-stop shops for graphical, search-based ads as well as emerging ad opportunities in video and mobile, and Google and Yahoo clearly have a head start in the depth and breadth of their platforms as well as their considerable client bases," Krans said. The acquisition also gives Microsoft increased depth in building and supporting next-generation advertising solutions and environments such as cross-media planning, video-on-demand and IPTV. Read more here about Microsofts Live Dynamics vision. "Joining the capabilities of these groups is an important step toward our goal of becoming an industry-leading, Internet-wide advertising platform," said Kevin Johnson, the president of Microsofts Platforms and Services Division. aQuantive was founded in 1997, has some 2,600 employees, and will continue to operate from its Seattle headquarters as part of Microsofts Online Services Business Services, Microsoft said. aQuantives mission has been to leverage the power of digital marketing services and technologies to drive measurable results for clients, the company said. "We look forward to combining forces and bringing the value of our combined assets to bear for the benefit of advertisers, ad agencies and publishers," said aQuantive CEO Brian McAndrews. The deal is expected to be completed in the first half of Microsofts fiscal year 2008 and is not expected to have a significant impact on the companys previously issued financial guidance. TBRs Krans said a byproduct of the increased level of acquisition activity in the online advertising space is the rapid inflation of purchase prices. Google paid more than 20 times DoubleClicks earnings to acquire the company, and the purchase price for aQuantive represents 13 times aQuantives annual revenue. "These multiples reflect both the large financial returns available in the online advertising market, and the huge market power of the current investors. Both Microsoft and Google maintain large corporate coffers, and are placing huge bets in order to better the futures of their respective online businesses," he said. Check out eWEEK.coms for the latest news, views and analysis on servers, switches and networking protocols for the enterprise and small businesses.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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