aQuantive, Microsoft’s biggest acquisition, and vertical integration
Microsoft is spending $6 billion to acquire aQuantive Inc., a Seattle digital marketing company. The bid represents an 85% premium on aQuantive’s share price, and will use a notable chunk of Microsoft’s cash reserves ($28 billion at the end of March 07).
aQuantive is forcasting revenues of about $600m for 2007, about 57% of which come from Digital Marketing Services. Other revenues come from Digital Marketing Technologies (about 28% of revenues) and Digital Performance Media (advertising broking, which represents about 15% of revenues).
Most commentators are focusing on the pure advertising side of the business: The company’s Drive Performance Media network buys ad inventory from the leading 250 online publishers, and has good behavioural targeting technology.
For Microsoft, however, subtantial value may be in aQuantive’s other areas of the business. It has deep relationships with many leading agencies and publishers through its Atlas digital marketing technologies. These help agencies with campaign management and reporting, and help publishers with inventory management.
Most significantly, aQuantive claims 30% of the Fortune 500 use its Digital Marketing Services - the largest part of its business.
aQuantive has a fine pedigee in Digital Marketing Services : this is the company which Razorfish, a darling of the internet boom, has ended up inside. Now called Avenue A|Razorfish, Razorfish was itself valued at $6Bn during the internet bubble, and has won many awards. The company creates large-scale websites and digital marketing campaigns for its clients.
There are three key ingredients to success in the digital marketing world that Google, Microsoft and Yahoo! are fighting in: technology, access to online ad inventory, and marketing services capabilities.
aQuantive will be a substantial, and necessary boost to Microsoft in all of these areas, but most importantly in the marketing area.
Digital marketing services are the key to success in online marketing, and the main challenge for most advertising agencies as they try to add online media into their advertising mix.
The acquisition of aQantive would make Microsoft by far the most vertically integrated digital marketing company among the major players.
October 24th, 2007 at 4:50 pm
[…] complement the company’s development of an industry-leading online advertising platform.” aQuantive was a smart buy for Microsoft. Kevin will have a plan which may go beyond simply having Facebook use his aQuantive platform. […]