Microsoft's Acquisition of aQuantive Jabs at Google-DoubleClick

Who knew? Back in April when I interviewed aQuantive CEO Brian McAndrews for the ad:tech San Francisco opening keynote, "The Digital Decade: What the Past 5 Years Can Teach Us About the Next 5," the industry was abuzz about the impending Google-DoubleClick merger. And not once did McAndrews let on that a similar merger was about to happen for his company. What's the old adage, "Silent but powerful," or "Silent but deadly," or something to that affect.

Today, Microsoft announced that it would pay $6 billion in cash for aQuantive, paying an 85 percent premium, with aQuantive shareholders receiving $66.50 a share. This would be the largest acquisition in the company's history. And while aQuantive's shares rose more than 77 percent after the announcement, Microsoft shares fell 1.1 percent.

The merger between technology company and advertising company is becoming a trend. Google recently agreed to buy DoubleClick for $3.1 billion, while Yahoo acquired 80 percent of Right Media in a deal valued at $680 million, and yesterday WPP Group said it would acquire 24/7 Real Media for $649 million.

Microsoft continues to lag behind Google and Yahoo in search traffic and search advertising revenue, so scooping up one of the largest digital agencies, which includes Avenue A |Razorfish, Atlas, and DRIVEpm, might be one of the smartest moves the software giant has made in a long time.

How will all of this merger activity affect the advertising industry? Will the industry become more competitive or more restrictive? With all of the major power in only a few hands, it would seem it wouldn't be good for the industry at large (just look at what happened to the music industry), but who knows, as advertising continues to move toward integration and becomes more digital-centric this could be the only way to go.

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  • Myles

    Originally, I was about to write that this seems like a way around (or an alternative solution) to competing in a digital-media up-front buying [not-so] frenzy.

    From an agency standpoint, and having worked with some really large global agencies, I was amazed that no matter what brand I was working on (from large corporate positioning objectives to CPG), the plans all seemed like they were pretty similar--similar ingredients for different recipes.

    Was this because they were just going to the pantry? That stock of impressions that large agencies purchased upfront and then fed into media plans? Was it that they could leverage their fairly secure projections for big annual media budgets for better rates buying in bulk, but then they needed to use it later on?

    So that's how I was originally approaching this response. But then it hit me--I'm looking at this from only one perspective.

    So, what's this really about?

    Maybe it's about margins.

    Even when we're dealing in terms of billions of dollars of revenue, the year-end profitability of even the largest, most efficient technology companies (not agencies) can come down to the ability to tip the balance sheet oh-so-slightly.

    So bringing in revenue via media rather than spending money on advertising sounds pretty attractive.

    What does this mean to most people reading Fast Company (who want to make a modest fortune or perhaps just romanticize the thought)?

    Well, in my mind, it's far more interesting when you're looking at the details. After all, not every agency (or other company) can work on Google, Microsoft or Yahoo! But as these monoliths (of industry and M&A's) snap up smaller shops a sub-level emerges.

    This sub-level of smaller businesses (which too often appear to consumers as clumps of sites offering similar tools and/or content) need to keep in mind that their true value won't be found with just a website--they need to prove their fulfillment of consumer desires & needs (typically in traffic), operational intelligence, actualized revenue AND profit.

    We talk a good bit about progress and future and "Web 2.0" and most think about interactivity and the tools associated with advanced website functionality.

    I find this a little upsetting, because that stance ignores the separation between those businesses that made it and those that failed during the "dot-com bubble burst."

    In my mind, those who made it even during the market drop were those who had built a business and not just a product (or website).