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Friday, May 18, 2007

Microsoft & aQuantive : Precursor To A Coming Larger Change?

First came the news of Google-Doubleclick Deal

Then came the announcement of Yahoo & Rightmedia deal

Then we heard about the rumours & denials about Yahoosoft.

WPP Group announced that it was buying 24/7 Real Media & Silver Lake Partners and ValueAct Capital announced earlier that they were buying Acxiomand taking it private.
Now comes the big ticket acquisition – Microsoft buying aQuantive for a big number – 6billion US$ in cash. aQuantive is a public company 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 – indication that there was competition in acquiring this and in more ways than one shows microsoft’s desperation.
Google shelled 3bn for DoubleClick and Yahoo paid about 650 million for Rightmedia. Real Media deal is valued at 650 million and Axciom deal valued in excess of 2 billion dollars.
Microsoft claims that it has been a customer of aQunative for sometime and its justification for acquisition makes interesting reading : As it sees the online ad market is $40 billion annually and growing 20% per year. It claims that the next step in the evolution of its ad network from its initial investment in MSN, to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet. Microsoft says it is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximize the digital advertising opportunity and sees this deal as giving them a more complete end to end solution (paid search, display ads, CPA). Microsoft says the deal will make their time to market much quicker and says the advantages to the stakeholders are manifold:

Advertisers and ad agencies will benefit from a world-class media planning, buying and campaign management solution to drive maximum ROI and optimize their reach to audiences across the increasingly fragmented, interactive media landscape.
Media owners/publishers will gain access to best-in-class inventory optimization and monetization solutions across a full suite of rich media, video and targeting capabilities.

Microsoft has really upped the ante here - having learnt what Google could do with its big ticket acquisitions like YouTube. I think this shows one more thing – talks of Microsoft buying out Yahoo at Yahoo’s terms goes down and this move could potentially put more pressure on Yahoo. This is a precursor to bigger changes that could happen in the larger internet space.

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