May 18, 2007 5:28 AM PDT

Microsoft to buy Aquantive for $6 billion

In a bid to boost its presence in advertising, Microsoft said Friday that it will pay $6 billion to acquire Aquantive, a digital marketing and services company.

The deal is Microsoft's largest ever, highlighting the importance of supporting more-advanced advertising products and technologies across areas including media planning, video on demand and Internet Protocol television. Aquantive produces the Atlas Media Console and Drive PM tools for advertisers and publishers, and owns interactive ad agency Avenue A Razorfish.

"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," Microsoft CEO Steve Ballmer said in a statement. "Today's announcement represents the next step in the evolution of our ad network from our 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."

Microsoft said it will pay $66.50 per share for Aquantive, an 85 percent premium over its Thursday closing price of $35.87.

Earlier this week, ad giant WPP Group said it will spend $649 million to buy digital marketer 24/7 Real Media, a company Microsoft had recently been rumored to be interested in. Last month, Google announced plans to acquire digital advertising company DoubleClick for $3.1 billion, and Yahoo followed that up with its own acquisition announcement--a $680 million deal for Right Media.

"The shift to online marketing has at last begun. We in the industry have been talking about the shift away from traditional media into online for the last 10 years," Shar VanBoskirk, a Forrester Research analyst, said in a statement. "I think the intensity and price tag of these acquisitions indicates that some very big media and agency firms are staking their bets online."

Aquantive, which was founded in 1997, has about 2,600 employees and is based in Seattle.

One analyst said Microsoft may have had to act fast, before all players in the market were snapped up. But challenges still exist for Microsoft if it is to fully capitalize on the purchase.

"Like Google's acquisition, Microsoft is trying to expand out and they're aware they're behind," said Brendan Barnicle, a Pacific Crest Securities analyst. "Microsoft has been struggling with MSN and this category for a while."

Potentially adding complexity to the Aquantive deal is that it comes along as Microsoft grapples with the challenges of getting its Windows Live strategy on track.

"This merger will be going on with a Windows Live overlay, and that's a concern," Barnicle said. "Microsoft has been going back and forth with Windows Live, and this deal will add more moving parts for them."

With the acquisition, Microsoft is aiming to offer advertisers, publishers and advertising agencies a soup-to-nuts approach in selecting digital advertising, services and technology tools that can be applied on Microsoft's network and, beyond that, to any Web site or distribution channel, such as Internet TV and video-on-demand.

Aquantive offers digital marketing services through its Avenue A Razorfish company, as well as digital marketing technologies through its Atlas operation. Aquantive also operates Drive Performance Media, which buys online ad inventory en masse and resells it to advertisers based on the groups they wish to target.

Aquantive's Atlas operations, which run a family of ad servers, compete directly with DoubleClick, while its Drive PM ranks No. 8 among ad network companies, Gartner analysts said.

The deal, which is expected to close in the second half of this year, will bring together two complimentary companies without a lot of overlap, Microsoft executives said during a conference call with analysts on Friday.

One aspect especially important about the acquisition is Aquantive's Avenue A Razorfish company. The deal will not only give Microsoft a new presence in the ad services business but will also help promote its new rich media and video plug-in Silverlight, the Gartner analysts noted.

The buyout is the largest Microsoft has done to date, with the next-largest transaction falling in the $2 billion range.

"We are willing to buy companies regardless of their size, if we can drive growth faster through an acquisition than internally. We have done this for smaller acquisitions and are willing to do it for larger ones too," Chris Liddell, Microsoft's chief financial officer, said during a conference call with analysts.

He added, however, that the acquisition must be strategically compelling.

"The market opportunities with this deal is in the tens of billions of dollars," Liddell said.

See more CNET content tagged:
aQuantive Inc., Razorfish, DoubleClick Inc., advertising company, acquisition

13 comments

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Dot Com Bubble Burst #2?
Okay, this is getting ridiculous. I mean, is Aquantive REALLY worth $6 Billion?? Isn't this just a way for Microsoft to say, "'neener neener' We paid more money for an ad company than Google did 'nyah'!"

I mean, no matter HOW deep your pockets are, spending an extra Billion or Two seems ludicrously insane by ANYONE's standards. Would Aquantive have balked at the mere paltry sum of $4B or even $3.5B??

Okay, my new theoretical law (assuming someone hasn't already theorized about it), is that since the original DotCom Bubble Burst was around early 2000, and this new Burst is BOUND to happen within the next two months or two buyouts (whichever comes first), then start your betting now that Bubble Burst #3 should happen around say, September 2014?

Geez, don't we learn ANYTHING from past mistakes??
Posted by TMB333 (115 comments )
Reply Link Flag
they knowns what they are doing
If aquantive would have agree in lesser price microst would never give them more!!!
Its a business,,and till today people were saying that they are very never spend money on anything and when they did people again saying they are foolish...
Posted by jaspal.m (52 comments )
Link Flag
Hipocrisy #324?
Okay, this *is* getting ridiculous. I mean, Google buys something --> cool, great, they know what they are doing, more great products for us, learn, Microsoft!; Microsoft buys something --> ridiculous! why?! this is just show-off!
You people ever heard of consistency?
Posted by Fil0403 (1303 comments )
Link Flag
Whatever
MSFT does it can never ever catch up with Google in search. Google rocks and continues to rock
Posted by sdeshpan (48 comments )
Reply Link Flag
Microsoft Spends To Get ahead
$6 billion for an on-line ad company? Ballmer, Gates and company
are striving for world domination against up-start Google who is
eating their lunches. Not that the pudgy & pasty Ballmer can't
afford to miss a few meals, they can't stand losing out "any"
revenue from advertising. God only knows how deprived we'd all be
if not for the crappy feature-packed unbiquity of all the MS
applicatons
Posted by Schratboy (122 comments )
Reply Link Flag
Great aQuantive profile
There's a great profile of CEO Brian McAndrews on www.washingtonceo.com:
<a class="jive-link-external" href="http://washingtonceo.com/index.php?id=90&#38;tx_ttnews" target="_newWindow">http://washingtonceo.com/index.php?id=90&#38;tx_ttnews</a>[tt_news]=759&#38;tx_ttnews[backPid]=103&#38;cHash=b863026d8a
Posted by pbucalo (3 comments )
Reply Link Flag
sorry, link broke
<a class="jive-link-external" href="http://*******.com/yot8p5" target="_newWindow">http://*******.com/yot8p5</a>
Posted by pbucalo (3 comments )
Link Flag
Microsoft: Lousy usability, ho-hum apps, scary security...
...but really GREAT ads!!! Way to go, guys!
Posted by Norseman (1319 comments )
Reply Link Flag
MS spends lots of money...
...and will screw something up, and still produce a lesser product.

Google spends less, and gets more out of what they buy.

For that matter, Google buys better companies, and spooks others into over-paying for lesser companies.

Any way you cut it, Google wins.
Posted by NWLB (326 comments )
Reply Link Flag
Google doesn't, is it?
We all know the story already: anything Google buys is good and worth the money; anything Microsoft buys is bad and overpayed.
Any way you cut it, Microsoft always has to be the one company who's wrong.
Posted by Fil0403 (1303 comments )
Link Flag
Paradigm shift
Big bux means world has shifted: smart money's on Internet becoming dominant economic, social, and political force. The implications are far-reaching and profound. Traditional centers of power cannot hold.
Posted by CESSNA150SKYPILOT (14 comments )
Reply Link Flag
 

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