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Microsoft Enters Web Advertising Fray May 18, 2007

Posted by Joanne KY Teoh in Advertising, News.
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The spending spree on Internet-advertising companies continues. Microsoft is snapping up Internet-marketing firm aQuantive for $6 billion in cash to increase its presence in the fast-growing online advertising market.

It is Microsoft’s largest acquisition ever, and the latest in a flurry of deals for online advertising firms by big Internet and media companies. The intensity and price tag of these acquisitions show that some very big media and agency firms are staking their bets online.

Microsoft’s all-cash acquisition represents an 85 percent premium, underscoring just how critical Microsoft believes the deal is to its troubled efforts to become a major force in the business.

Microsoft is the latest technology firm to pounce on the shrinking independent online advertising sector. Last month, search engine giant Google agreed to buy DoubleClick for $3.1bn, while Yahoo snatched the 80% of Right Media Exchange it did not already own for $680m.

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, Microsoft Chief Executive.

The aQuantive acquisition enables Microsoft to offer an Internet-wide advertising platform for advertisers, publishers, agencies and media owners. It gives Microsoft increased abilities in building advertising solutions such as cross-media planning, video-on-demand, and IPTV. Read the Microsoft media release here.

aQuantive, founded in 1997, has taken advantage of a major shift in advertising to the Internet from television. The firm helps companies plan and run Internet-ad campaigns. It counts Ford Motor, Verizon Communications, Capital One and Microsoft among its customers.

Based in Seattle, aQuantive has three major businesses. Its Atlas unit competes with DoubleClick and is used by advertisers and publishers to deliver ads online in real time when users visit a Web page. The company also owns AvenueA/Razorfish, a leading interactive ad agency, and DRIVEpm, an advertising network.

Until now, Microsoft has sold ads on its MSN portal and used a technology called AdCenter to sell ads linked to Internet search — a booming business, and the cornerstone of Google’s power. But Microsoft’s share of the search business has steadily declined, limiting the effectiveness of AdCenter.

With aQuantive, Microsoft will be able to help sell and broker ads on sites across the Web, a business seen as increasingly important as advertising continues to shift online. The acquisitions of DoubleClick and RightMedia by Google and Yahoo were also intended to bolster those companies’ efforts to sell and broker ads on Web sites.

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