Publicis Groupe to buy Microsoft's Razorfish

French advertising group Publicis Groupe has agreed to acquire Internet ad agency Razorfish from Microsoft for $530 million in cash and stock.

Razorfish will continue to operate under its own brand name and continue to serve as Microsoft's "preferred provider" for Internet advertising, the companies announced Sunday in a joint statement. The deal includes a strategic alliance agreement in which Publicis Groupe will purchase display and search advertising from Microsoft over a five-year period.

"The purchase of Razorfish is a new step in our strategic plan to be the unquestionable leader in digital communication," Publicis Groupe Chief Executive Officer Maurice Levy said in the statement. "Once this acquisition is complete, about a quarter of our revenue will come from digital communication and our ability to grow and conquer will be reinforced."

Publicis Groupe is one of the world's largest media companies, employing about 44,000 people at advertising networks Leo Burnett and Saatchi & Saatchi, as well as media buyers Starcom MediaVest Group and ZenithOptimedia.

Microsoft had reportedly been shopping Razorfish around for the past few months, with top ad firms WPP, Omnicom Group, and Publicis Groupe all expressing interest in Razorfish. Talks were also held between Microsoft and agencies Interpublic Group and Dentsu.

Formerly known as Avenue A/Razorfish, the agency was credited with designing the logo for Microsoft's new search engine Bing, as well as creating the online ads for the ensuing publicity campaign. The Seattle-based agency has more than 2,000 employees and counts Dell, Disney, and Nike among its clients.

Microsoft acquired Razorfish in 2007 as part of its $6 billion takeover of Aquantive. The deal for Aquantive was Microsoft's largest ever and highlighted the importance of supporting more-advanced advertising products and technologies across areas including media planning, video on demand, and Internet Protocol television. The acquisition of Razorfish specifically was considered especially important as a way to give Microsoft a new presence in the ad services business and also help promote its rich media and video plug-in Silverlight.

[monkeyfun14]

If this division has helped them why are they selling it?

[mbenedict]

Basically as a technology company, Microsoft wants to be in the content-delivery (infrastructure) business, not the content-making business. They always want to leave content creation to other companies (or to users).

Microsoft got Razorfish as part as a big ad-infrastructure deal with Aquantive. At that time Microsoft needed an online-ad solution similar to what Double-click offered (since bought by Google).

But Razorfish itself is a pure advertising firm. It makes ads, not deliver them. Razorfish has little to do with technology, other than the type of ads it makes for clients. Even though Razorfish is a gem, Microsoft has no interest in running an advertising firm since it doesn't fit anywhere within its portfolio.

So Microsoft is keeping the infrastructure-parts of Aquantive and selling-off Razorfish, which probably has been its intent since the beginning. It's not unusual in a big acquisition to keep the parts you need and spinning off the rest.

[Vegaman_Dan]

Razorfish was not what Microsoft wanted when they bought the parent company. It was sort of a step child as a result and finally is being cast off.

[EvanSei]

they are selling it to make a quick buck and because they know something that we don't, I wouldn't be surprised if razorfish runs into some trouble in the next few months

[Mr. Dee]

Maybe its because there is some overlapping technology in Microsoft's advertising portfolio? Ever thought about that? Why must we assume the worst?

[monkeyfun14]

Wasn't assuming the worse was just curious.

[rmva]

In addition, having a wholy-owned advertising agency was pissing off the many stand-alone agencies they've been dealing with for years.

[aatinko]

That actually makes good sense to me dude!

RT
[CNET editor's note: Prohibited self promotion deleted.]