Microsoft To Acquire Online Marketing Firm aQuantive For $6 Billion

A day after 24/7 Real Media was acquired by WPP, Microsoft announced plans buy digital ad firm aQuantive, which owns Atlas and Avenue A | Razorfish, for $6 billion in cash. It is apparently the biggest acquisition in Microsoft’s history.

From its press release, Microsoft says it sees the purchase as helping it build an advertising platform across various media:

The aQuantive acquisition enables Microsoft to strengthen relationships with advertisers, agencies and publishers by enhancing the Company’s world-class advertising platforms and services beyond its current capabilities to serve MSN. The acquisition also provides Microsoft increased depth in building and supporting next generation advertising solutions and environments such as cross media planning, video-on-demand and IPTV. Combining aQuantive’s technologies and services with Microsoft’s portfolio will provide value for the industry’s key constituencies as follows:

The deal is expected to close in the first half of the 2008 fiscal year for Microsoft.

The move follows on Google’s planned acquisition of DoubleClick and Yahoo’s intended purchase of Right Media that were announced last month.

Microsoft After 24/7; Another Search Engine To Own SEM Firm? from Danny covers some issues Microsoft is likely to face in gaining a firm that also does search marketing.

Battelle Chats With Microsoft’s General Counsel On Google/DoubleClick Antitrust Allegations and Complaint Over Google-DoubleClick Acqusition Expected To Be Filed At FTC Today cover Microsoft’s opposition to Google’s DoubleClick purchase, which might be perhaps weakened by its own deal.

Various news outlets (AP, Reuters) are starting coverage. Techmeme is starting round-up coverage here.

The conference call

On the analyst call, which just concluded, were Microsoft’s Kevin Johnson, President, Platforms & Services Division, Christopher Liddell, CFO, Brad Smith, Microsoft’s general counsel, and Brian McAndrews, aQuantive CEO. Here are some comments and quotes from the call:

Apparently Microsoft won a competitive bidding situation. The other bidders were not disclosed. This helps explain the purchase price and the premium that Microsoft paid for the company.

Kevin Johnson said this deal reflects Microsoft’s commitment and strategy to become a “major player in online advertising.” He cited other recent Microsoft ad-related acquisitions as support for this proposition: Massive, Motion Bridge and ScreenTonic.

CFO Liddell added, “This deal takes our ad business to a new level and will help earn a bigger slice of the $40 billion online advertising market.” He also said the deal improves Microsoft’s ability to “monetize its own inventory and display ad inventory on third party sites.”

Johnson pointed out that this now gives Microsoft the ability to offer “display solutions for all agencies and publishers on any website.” He added that the combination of aQuantive’s technology, relationships and other assets would provide Microsoft with greater network scale and a “more complete end-to-end solution for all forms of [interactive] advertising.”

Indeed, there was repeated emphasis from multiple speakers on other areas beyond the desktop and Internet, including in-game advertising, mobile and “emerging” sectors such as IPTV.

Microsoft General Counsel Brad Smith took pains to distinguish this deal from Google’s acquisition of DoubleClick. He argued this deal will promote competition, while Google’s purchase of DoubleClick will reduce competition. He also argued that Google and DoubleClick have “overlapping businesses,” while Microsoft and aQuantive are complementary.

Asked about whether agency Avenue A | Razorfish would be spun off, CFO Liddell said no. McAndrews will apparently report to Johnson.

Update: 15 minutes with Joe Doran, General Manager, Microsoft Digital Advertising Solutions

I got my 15 minutes with Doran and rifled off a bunch of questions:

On potentially real and perceived conflicts of interest between Microsoft and Avenue A:

We want to maintain the independence that Avenue A | Razorfish enjoys today. We will operate them at arms length to avoid any perceived conflicts of interest. There won’t be any preferential pricing. Our sales teams will negotiate just like others.

On the difference between Microsoft-Avenue A and Google-Performics:

Sixty percent of their [Performics'] volume is coming from one source [Google] and that creates an inevitable conflict.

(He said that MSFT’s share is much smaller in search and thus there’s no conflict. However, Doran acknowledged that there would be a potential conflict if MSFT had a larger search market share.)

On creating a display network:

With the introduction of our inventory into DRIVEpm, into that ecosystem, we believe we can create a vibrant ad network.

On industry consolidation:

We’re going through a period of rapid consolidation. We believe there will be two major ad delivery platforms at most and this [acquisition] demonstrates our commitment to be there.

On who “the two major ad delivery platforms” will be:

Us and Google

(In the wake of this deal Om Malik asks in his poll today who will win: Google or Microsoft?)