Breaking: Microsoft is acquiring advertising network aQuantive, the parent company to Avenue A | Razorfish, Atlas and DRIVEpm, for roughly $6 billion in an all-cash transaction, the company said this morning.
aQuantive is a public company (AQNT) and had a market cap of just $2.8 billion as of yesterday. The acquisition price of $6 billion is a roughly 2x premium on yesterday’s closing price, which is a reflection of the fact that this were competing bidders (see notes below). The acquisition comes after recent big acquisitions by Google and Yahoo in this space. Google bought Doubleclick for $3.1 billion in April. Later that same month, Yahoo acquired competitor RightMedia for $680 million. Just yesterday, WPP Group acquired yet another company in this space, 24/7 Real Media, for $649 million.
2006 revenues for aQuantive were $442 million. Net income as about $54 million.
aQuantive’s operating companies include both tools and ad agencies. The company is located in Seattle.
Microsoft is held a media call this morning to discuss the transaction. My notes are below. At about 7 am PST a recording of the call will be available at 1-800-774-9248.
Notes From Media Call:
(see CenterNetworks as well, Allen Stern has taken very complete notes)
Deal brings lots of new relationships with publishers and advertisers
Microsoft is now able to sell display ads on any website
Good tools for rich media ads, including IPTV
aQuantive was founded in 1997.
Microsoft says they are showing they are willing to aggressively grow strategically. Ad market is predicted to grow dramatically over the next few years. Lots of synergies between companies. Will be able to better monetize microsoft inventory, and will now be able to sell display ads on third party sites. Financial implications to MS: deal will close in FY 2008. They do not think it will have a significant impact on MS operating income.
MS expects an antitrust review in the U.S. and maybe in other countries. Probably not EU, but perhaps in Germany.
MS talking about privacy: says aQuantive has high degree of respect for privacy and fits well with Microsoft’s privacy policies.
Bear Stearns question: does this affect MS’s opinion on Google/doubleclick transaction. MS: no, not at all. Says this will promote competition and Google/doubleclick will hurt competition. Microsoft is in none of the businesses that aQuantive is in, whereas Google was already in direct competition with doubleclick and will give Google 80% market share in those markets.
question on how difficult integration will be with MS’s Adcenter platform? MS says online ad market is $40 billion annually and growing 20% per year. Says MS is committed to getting their share of the market, and this deal gives them a more complete end to end solution (paid search, display ads, CPA). MS says the deal will make their time to market much quicker. They are looking to consolidate their inventory from MS sites to create more scale for ad network. Talking about MS’s new software + services model, phones, games, IPTV, etc. and that advertising will drive these businesses.
MS has a long relationship with aQuantive, has been a customer for many years.
question on the size of the premium v. yesterdays closing price for aQuantive. MS says if they can drive growth through acquisition better than through internal growth they will do it. “we have the economic fire power to do more if we wish to”. MS says this was a competitive bidding situation, and “we are delighted to have won”
MS is saying that there is very little overlap between the two companies, the products are highly complementary.
this is largest MS acquisition to date, but this is only 2% of MS market cap, and they have $35 b in cash on had.
Wow.
Woot.
WoW.
Wow!
Blimey.
The question remains what is going on and why they all in the rush…
And another one…
From the call notes I have posted… this is a big one I think from a caller:
Does this affect MS opinion on the Google/DC transaction?
The Microsoft/aQuantive transaction will increase competition, the Google/DC transaction will decrease competion.
Funny bit Allen:) They forgot to add the fineprint…”The Microsoft/aQuantive transaction will increase competition…if MS is ever able to discover its online strategy”
microsoft must be really needy paying this damn high price for a company that makes such small net profit.
also advertising is changing what if everyone installs adblocker for ff?
what if some other companies copies existing advertising concepts but makes it better? not worth the 6bn $ in my opinion
but the main point probably was: we can advertise on *any* homepage just like adwords
Exactly as I was commenting yesterday… This is the year of the AD Acquisitions!
- the reason everyone is doing the “ad company Land run…”
- Becuase no one was moving, then Google Jumped in - thus causing a dominoe effect; for everyone to keep up ..
-RB
Mama… Nice to see Balmer step up in a big way. This is great for the businesses and the rising tide will lift all boats. My take on WPP - 24/7 with some MSFT aQauntive comments made before I read the news: http://blog.contextweb.com/ad-.....real-media
All advertising is moving online — everyone’s woken and realised this simple fact. TV, radio, print etc. is dead. MS wants to be part of this new Mega era of online advertising.
In a few short years the word “online” will be dropped from “online advertising”, it’ll just be “advertising”.
Yeah right, please explain that to all my relatives 40 and older (about 15 at last count). They have lots of buying power, lots of free time, and little interest in the online world. They are not alone and will live for at least another 20-30 yrs. Plenty of youngins to indoctrinate though; if only the kids had discretionary spending habits of $40-60K/year.
This ad serving/network space is definitely going crazy, unlike how we started 7 years ago or activities around it a year ago.
My crude, and knowingly flawed, analysis shows the valuation of the deal at $0.027 per monthly impression served (using their Atlas and Accipiter #s).
http://zenrob.com/2007/05/18/m.....-buys-247/
Time to start using ad blocking extensions for firefox…
This decision somehow feels better than a MS/DoubleClick acquisition would have felt. I can’t help but shake the feeling, though, that this purchase is purely because MS has had little luck launching AdCenter. It’s frustrating how they keep perpetuating the “we buy our success” image.
Let’s see some more innovation over there guys!
We don’t need a network (middleman) to buy/sell ads.
How about a WordPress plugin that networked standard-sized (AdSense-like) ad spots across all blogs that used it. Not like a bannerswap/rotation, but like an approve/decline marketplace, decentralized. Now you have something like AdSense without the middleman, taking 50%. Hmm…
A desperate move by Microsoft.
May I suggest proof reading your story prior to posting on your blog. There are numerous grammatical errors that greatly detract from the newsworthiness of the article.
This shows that we are all related to the same ‘mother’ in one way or another!
Avenue A / Razorfish is a strong agency, and if they had simply purchased them for a reasonable price, I’d say go on, but $6 bil for aQuantive? That’s a lot o’ bling. Of the four deals (Google/DC, Yahoo/RM, WPP/24/7, Microsoft/aQ) I think they rate this way:
1. Yahoo/RM - Right Media is making cash hands over fist, and I think this was a steal for Yahoo.
2. Google/DC - was overpriced until today, should help them sort some things out.
3 (a tie) WPP paid a lot less, but aQ has better overall parts (esp. Atlas and Avenue A/Razorfish)
I hate myself. When I first bought this stock, it was at $14. Sold it to buy Valueclick. Yesterday, I thought this was the one stock Microsoft should buy. When I was working for an online ad network, Aquantive was top dog - the Tiffany of the online Ad World. Their analytics are the best. Maybe 2nd to AOL’s Advertising.com. Plus, Everyone is in bed with them. Every move they make is brilliant, especially the purchase of Razorfish. And they are based in Seattle. It’s a total no-brainer. I could have taken the year off if I had just kept that stock.
So, who’s left in this space? From the public ones: VCLK. What about private guys? adbrite?
I hope someone comes up with an easy to use service the agencies will adopt which woudl be able to track branded widgets cross platform.
I anticipate the next purchases to come in the “wrapper” space.
What a great deal for the aQuantive people… Time will tell if the integration can happen seamlessly. Living in Seattle and knowing people at both organizations, they have different cultures.
Having been through an acquisition, the culture issue can be a major factor.
How much interest can you gain on $6 billion in cash? Then how does that compare to the incremental cash earned? Hmm.
“AdSense without the middleman”
I definitely like the sound of that. Somebody make that happen.
Wonder who the other bidders were. Since all the Online companies have made acquisitions in the recent past it might be the “traditional” ones like WPP.
Could ValueClick be next?
I wonder what Microsoft will do with the Razorfish part of the business, which strikes me as a strange, irrelevant bastard child in this transaction. Financially, it’s probably not significant enough to be a blip on the radar, at least for a while.
How will these developments shape the ad industry and online advertising moving forward? From my vantage point/experience with this aspect of internet business is that a lot of companies are going to ad networks because they’re bankable, a little more reliable/certain, than advertisers picking individual sites on their own. To me, it seems like everything is presently wrapped around these networks, but I rarely read about it in anything to really get a sense or perspective about it.
Or am I not understanding something about Google, Microsoft, etc. initiatives here? Help!
But what about Zedo? They are a smaller Ad Server, but still seem like a solid aquisition target.
Thanks Bill W. That was off the top of my head. I’m thinking now the format for exchanging ad requests would be more important than the plugin, like a trackback for ads. That way various plugin authors could sort/filter/list the requested ads in a variety of ways, because there will be noise, spam, abuse. Off the top of my head, you could do something simple, rank incoming ads requests by Google PR, and/or do something Akismet-ish. Of course, that will be up to plugin authors to tinker with. Inevitably it would open to non-blogging buyers and sellers, so the data format would need fields like (URL, text of ad, is it a blog, etc.) I’ll have to give it more thought. If anyone’s interested in coming up with a standard format for the requests, or to tell me I’m nuts, my AIM is “yesiliveinaustin” Or maybe something like this already exists and I just haven’t heard about it yet.
There are a couple of great in depth pieces about aQuantive at http://www.washingtonceo.com:
Behind the man behind aQuantive
Microsoft to buy Seattle’s aQuantive
Zuckerberg would’ve parted with his baby for that much dosh. Ballmer should’ve got the best social network on his side instead of a second choice ad network.
Not a bad move. This will put MS in the middle of Print, TV and iNet.
Although some parts of aQuantive could be split off and sold, I don’t see that happening.
Stay tuned for more buys in the media arena
This deal leaves Microsoft in the dark. It diverts Microsoft’s attention from competing against Google on search advertising. And while Google is so dominant in search advertising, it will dominate display advertising.
Microsoft now owns most of web consultancy consolidation post DotBomb. For those in the dark, they now own all the assets of the following companies:
aQuantive
Razorfish
SBI
Scient
iXL
Lante
Divine
Viant
Marchfirst
UsWeb
CKS
Emerald Solutions
Xcelerate
This company is ripe with assets of failed companies.
Looks like the Big 6 advertising holding companies of WPP Group PLC, Omnicom, Interpublic, Publicis, Dentsu and Havas either now have some serious competition or will be receiving offers for a spin off sale.
I’d say we can look for some roll-up mergers to occur in this sector from a handful of smaller web 2.0 consultancies to fill to void. Count me in!
I was not aware that MS bought marchFIRST. I also didn’t think there was much left after they went bankrupt.
Sam… They didn’t. aQuantive is a product of all of the combined assets of those companies. Through a series of mergers, acquisitions and auctions, this is what you get…. Microsoft.
Craziness.
Are you waking up to the fact that on the net, this is true http://papers.ssrn.com/sol3/pa....._id=166108
The sale was for a 1x premium, not a 2x premium.
From what i understand a-quantive delivers ads for google and yahoo. Ad inventory is running on empty out, not enough good location to go around. I think the future will show strategic keyphrase dot com “location inventory” to be the key to the future of premium online ad placement.