The Microsoft move to buy aQuantive on first glance appears to be a knee-jerk reaction to losing the DoubleClick deal to Google, but on second glance it just HAS to be a knee jerk reaction to the DoubleClick deal.
We’ve read analyses that suggest that Microsoft has been looking at this for a long time, and it may well have been. If we are being nice to Microsoft management it looked at aQuantive and looked at DoubleClick and realized that it only really needed the capabilities of DART and an advertising auctioning system, and since DoubleClick has these, it would go for the cheaper option first and take the Rolls Royce (Cadillac?) version second.
It’s hard to be convinced when the difference in price is $3 billion, but then Microsoft has earned the right to pay that kind of money. It has given away tens of $billions away to shareholders over the past few years and generates around $3 billion a quarter or more in free cash flow, so this is just two quarter’s cash generation, for the biggest acquisition Microsoft has ever made.
Clearly somewhere behind all of this is a perceived advertising architecture, but now is not the time to unravel it in serious detail. Microsoft has done little more than ‘conceptualize’ the adCenter idea, which is a way of placing advertising and tracking it, across multiple media, to multiple demographics which are doing multiple things on multiple devices, and yet they still view the advert.
The DART system is a well understood, well used ad delivery and reporting system, and the Atlas Media Console created by aQuantive subsidiary Atlas, is described by many as DART on steroids. Be that as it may be, it is not so well ensconced in the market as DART. Another part of aQuantive is DRIVEpm, which matches advertiser campaigns with publisher inventory.
The final part of the equation is an interactive advertising agency called
Avenue A/Razorfish, named in this way because it is a previous merger.
Razorfish used to be one of the most overhyped web building companies in the world. It built cool websites and charged two to three times what they were worth back in 1999 onwards until the dotcom crash. It was forced into the hands of aQuantive in order to survive.
So Microsoft can now build cool web sites, create advertising, do media planning across multiple formats, with different advertising types. It can acquire that advertising through the aQuantive media buying arm, and it has added odds and ends like intelligent email marketing.
On the upside, this potentially makes MSN more competitive. It might lift its revenues above Yahoo, and keep AOL at bay, and begin the long chase for Google. But equally, having a neat system is one thing, but if an A list advertising client has spent a fortune building a responsive web site, and designing multiple pronged, intelligent ad campaigns, then it will want to place those adverts on the best sites, and that will include Google.
In the same way, a Google owned DoubleClick cannot drive customers only to Google sites, and must deal with all of the others.
So we’re not sure exactly what either purchase has brought Google and Microsoft, especially since Microsoft has paid around 12 times existing revenues, a truly silly figure.
Combining creative talent and technology has always caused something of a disaster and putting Microsoft together with aQuantive is likely to create cultural difficulties that may well result in lost opportunities, including staff departures and a diluting of the cachet attached to aQuantive.
The deal is expected to be completed in the first half of Microsoft’s fiscal year 2008 and will not have a significant impact on the financial guidance previously issued by the company part from the fact that it will be $6 billion poorer. aQuantive has 2600 employees, and will operate from its Seattle headquarters as part of Microsoft’s Online Services Business.
In the meantime, almost as if Google is following its own ‘feature list’ agenda, Technology Review reports that Google is talking to Salesforce.com with a view to getting a specialist extension of Salesforce to act as the CRM for advertising agencies. There is no deal ready to announce as yet says Technology Review but the aim is to build a web-based integration of the two product suites and a deal should emerge during June.