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Summary:

Microsoft is acquiring interactive ad shop aQuantive for $6 billion in cash. The company said it will pay $66.50 a share. The move comes a d…

Microsoft is acquiring interactive ad shop aQuantive for $6 billion in cash. The company said it will pay $66.50 a share. The move comes a day after digital ad agency 24/7 Real Media was bought by WPP Group for $649 million. Microsoft had reportedly been angling to buy the agency as a way to counter Google’s pending purchase of online ad company DoubleClick for $3.1 billion. As WPP appeared to thwart Microsoft’s efforts to own 24/7, the software marketer is now in a position to determine whether WPP’s Group M unit gets to buy aQuantive’s digital ad network subsidiary DrivePM. Aside from that agency, Seattle-based aQuantive, which employs about 2,600 people, also owns interactive ad firm Avenue A/Razorfish and digital marketing solutions provider Atlas. The deal is expected to be completed in the first half of Microsoft’s fiscal year 2008.

In a prepared statement, Steve Ballmer, Microsoft’s CEO, said the addition of aQuantive represents the next step in the evolution of Microsoft’s ad network. And given the seeming sudden quality of announcement, perhaps Microsoft’s interest in 24/7 wasn’t so intense after all. As Rafat had noted in a mid-April post looking at the likely deals to follow Google/DoubleClick, the combination of Microsoft and aQuantive was one of the most anticipated. Release. More to come

Update
: WSJ: The $6 billion payout provides an 85 percent premium to aQuantive’s closing price Thursday. And the hefty price won’t impact Microsoft’s financial outlook, as the price tag represents about 2 percent of Microsoft’s market capitalization. As for which company to watch next? The prospects of further deals is lifting the shares of one of the dwindling number of high-profile independent online ad brokers, ValueClick. Although it is currently the being investigated by the Federal Trade Commission, ValueClick posted further gains Friday, up 10 percent to $30.71.

Adweek: This is Microsoft’s largest acquisition by three fold. But executives said today on a conference call that the briskly growing digital advertising marketplace (which the call’s participants estimated at $40 billion) provided enough opportunity for what Kevin Johnson, president of Microsoft’s platform and services division, called the company’s “big bet.” Microsoft has lagged Google in the internet search market and Yahoo, which recently added to the acquisition frenzy with its purchase of ad exchange Right Media, in brand advertising. While Google made $1 billion last quarter, Microsoft’s MSN unit lost $205 million. Google accounts for an estimated 33 percent of the online ad market compared to Microsoft’s 7 percent, a difference that led to speculation earlier this month that Microsoft would buy Yahoo. Its purchase of aQuantive will alter the current competitive landscape with Google and Yahoo significantly: two-thirds of aQuantive’s revenue comes from Avenue A/Razorfish, which creates websites and ad campaigns for clients like Ford, Best Buy and Coors. It is also one of the largest buyers of digital media, with $542 million in billings.

  1. geoff vague Friday, May 18, 2007

    How will corporate America feel about doing business with Avenue A/ Razorfish now that they're part of Microsoft? Or with MSFT flip that part of the business to an ad agency holding company? Seems like turmoil for Razorfish and their clients for the next year or so as this plays out.

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  2. Good for aQuantive. The early bird gets the worm, but the second mouse gets the cheese!

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