The latest deal to happen in the already hot online ad business saw Microsoft announce its decision to buy aQuantive on Friday. Microsoft Corp. said that it has agreed to acquire aQuantive Inc. for $6 billion. The all cash deal paying $66.50 per share of aQuantive amounts to a whopping 85 per cent premium on the stock price of aQuantive recorded on Thursday. aQuantive’s stock closed at $35.87 on Thursday.
The deal comes in a month that has witnessed furious activity in the online advertising business. Google started the acquisition war by acquiring DoubleClick in mid-April and Yahoo followed it by purchasing Web ad exchange Right Media Inc. Now, it seems that Microsoft doesn’t wish to lag far behind. Microsoft’s announcement comes only a day after WPP Group Plc., world’s second largest advertising and marketing conglomerate, acquired online ad firm 24/7 Real Media for $649 million.
‘Why’ of the deal
As the technology and software companies try to jostle for a position in the competitive industry dominated by Google, the deal signifies a frantic race among them try to buy out few remaining online advertising businesses. Web’s four giants have already pumped more than $10 billion in the past two months to buy online ad businesses. All the deals are aimed at boosting the Buyer’s ability to deliver Internet ads and consequently mammoth revenues. Here is what Microsoft said while announcing the deal:
This deal expands upon the company’s previously outlined vision to provide the advertising industry with a world-class, Internet-wide advertising platform as well as a set of tools and services that help its constituents generate the highest possible return on their advertising investments.
The websites that draw the most traffic - Google, Yahoo, Microsoft’s MSN and AOL - are increasingly looking to increase revenue by advertisements that they display on behalf of other sites. Companies like DoubleClick and aQuantive provide technology used by Web site publishers to deliver advertisements to viewers. These companies deliver display ads on Web sites as banners and boxes, which direct users to advertiser’s Web sites. aQuantive’s acquisition could provide a much needed boost to the fading online advertising business of Microsoft.
aQuantive’s technology will allow Microsoft to deliver ads to third-party Web sites. This should go down well with Microsoft’s current plans to deliver ads onto other platforms like Xbox Live, Windows Live and Office Live. The all cash acquisition will go down as the largest ever in Microsoft’s history but wouldn’t be much of a financial burden for it. Microsoft had reported a cash balance of $28 billion on its balance sheet for the quarter ending in March. aQuantive is the owner of an important online advertising firm in Avenue A/ Razorfish, which buys sells and creates online advertising. aQuantive, will continue to operate from the firm’s Seattle headquarters as a part of Microsoft’s online services business. Employing 2600 employees, it had reported a profit of $54 million in 2006.
The deal should especially please Microsoft’s stakeholders who had seen Microsoft loosing ground in the online traffic. It also bolsters the chances that Microsoft-Yahoo deal may be on, since it clearly shows that Microsoft wouldn’t hesitate to free its coffers to buy strategic companies. aQuantive, despite of all its credentials, still doesn’t provide the half million advertisers that Microsoft needs to compete against Google.
