Microsoft smacks down $6 billion for online advertising firm

Damn, Microsoft just smacked down $6 billion for online advertising firm aQuantive Inc. says MSNBC. Paying a hefty premium, too. More on Google News for aQuantive. This is a firm that builds ads and marketing for companies. We know there’s a lot more money that’ll come into this market over the next few years. I wonder what else is up Microsoft’s sleeve now? They need to buy some audiences, the best audiences aren’t under Microsoft’s brands anymore. This helps keep Microsoft in the relationship game with advertisers, but not sure it really shows a good strategy yet. It sure would be fun to be a fly in the wall inside Ballmer’s office right now. What do you think?

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Robert Scoble

As Startup Liaison for Rackspace, the Open Cloud Computing Company, Scoble travels the world looking for what's happening on the bleeding edge of technology for Rackspace's startup program. He's interviewed thousands of executives and technology innovators and reports what he learns in books ("The Age of Context," a book coauthored with Forbes author Shel Israel, has been released at http://amzn.to/AgeOfContext ), YouTube, and many social media sites where he's followed by millions of people. Best place to watch me is on Facebook at http://www.facebook.com/RobertScoble

Comments

  1. I think there a good strategic fit with Atlas, Accipiter and DrivePM, on the other hand I wonder how we are going to build synergies with pure digital ad agencies like Avenue A /RAzorfish and Duke?

  2. I think there a good strategic fit with Atlas, Accipiter and DrivePM, on the other hand I wonder how we are going to build synergies with pure digital ad agencies like Avenue A /RAzorfish and Duke?

  3. Robert- This is Jeff Buddle from BtoB. Been trying to get a hold of you regarding next week’s webcast you’re doing with us. Figured that this was as good a place as any. Please let me know a good time to contact you. I need to set up a pre-call with all participants. -Jeff

  4. Robert- This is Jeff Buddle from BtoB. Been trying to get a hold of you regarding next week’s webcast you’re doing with us. Figured that this was as good a place as any. Please let me know a good time to contact you. I need to set up a pre-call with all participants. -Jeff

  5. If the numbers in the MSNBC article are correct — Microsoft paying $6 billion in cash for a company with reported 2006 profit of $54 million — then I am simply floored.

    Very un-Microsoft-ish to overpay to that extent.

  6. If the numbers in the MSNBC article are correct — Microsoft paying $6 billion in cash for a company with reported 2006 profit of $54 million — then I am simply floored.

    Very un-Microsoft-ish to overpay to that extent.

  7. Hints of a desperation purchase. I’d love to know when the acquisition process started…

  8. Hints of a desperation purchase. I’d love to know when the acquisition process started…

  9. Wow. I work for aQuantive and I can tell you I didn’t see this one coming. They played this one REALLY close to the vest. I live in Seattle and never wanted to work for MS and now I do, go figure.

  10. Wow. I work for aQuantive and I can tell you I didn’t see this one coming. They played this one REALLY close to the vest. I live in Seattle and never wanted to work for MS and now I do, go figure.

  11. They are wading into murky waters here unless they very quickly sell off Razorfish and the other creative agency pieces of this. As a search advertising network MSN works with advertising agencies as a media company. Now they own an advertising agency(s) and will be perceived as a competitor to their own customers. This is the frienemy/FOG problem that Google has been facing in the agency world where the vast majority of media buying originates. They’ve been careful to stay out of the content creation business. MS is in tricky territory here. This could actually help Google.

  12. They are wading into murky waters here unless they very quickly sell off Razorfish and the other creative agency pieces of this. As a search advertising network MSN works with advertising agencies as a media company. Now they own an advertising agency(s) and will be perceived as a competitor to their own customers. This is the frienemy/FOG problem that Google has been facing in the agency world where the vast majority of media buying originates. They’ve been careful to stay out of the content creation business. MS is in tricky territory here. This could actually help Google.

  13. un-Microsoft-ish to overpay to that extent.

    It is called desperation!

    Comment by Denis the SQL Menace — May 18, 2007 @ 8:19 am

    No more desperate than Goolge over paying, if it fits….Buy It.

  14. un-Microsoft-ish to overpay to that extent.

    It is called desperation!

    Comment by Denis the SQL Menace — May 18, 2007 @ 8:19 am

    No more desperate than Goolge over paying, if it fits….Buy It.

  15. Funny thing about price. It’s a medium of communication. $6 billion is a whopping big number. Biggest acquisition MSFT has ever made. It tops the recent spree of ad-related acquisitions by online mega-players. $6B is a heck-of-a ta-DAH!

    Now everybody is on notice: Microsoft really is serious about building an ad business.

    Bear in mind, they’re not just acquiring technologies: they’re getting worldwide account presence, and above all the talent and experience of people who are at the top of the online ad game.

    @1. Avenue A/Razorfish may be the most important part of this deal. It’s the riskiest because (as Geert’s post indicates) Microsoft will tend to view an ad agency as a foreign body and the antibodies may come forth to reject the transplant. But if Microsoft is serious about creating new value for advertisers, it needs to go beyond technology and users and learn to operate from the POV of advertisers.

  16. Funny thing about price. It’s a medium of communication. $6 billion is a whopping big number. Biggest acquisition MSFT has ever made. It tops the recent spree of ad-related acquisitions by online mega-players. $6B is a heck-of-a ta-DAH!

    Now everybody is on notice: Microsoft really is serious about building an ad business.

    Bear in mind, they’re not just acquiring technologies: they’re getting worldwide account presence, and above all the talent and experience of people who are at the top of the online ad game.

    @1. Avenue A/Razorfish may be the most important part of this deal. It’s the riskiest because (as Geert’s post indicates) Microsoft will tend to view an ad agency as a foreign body and the antibodies may come forth to reject the transplant. But if Microsoft is serious about creating new value for advertisers, it needs to go beyond technology and users and learn to operate from the POV of advertisers.

  17. I think if they rummaged around in the sofa they could’ve found another billion and bought Chrysler instead.

    Given the complete lack of any stated vision or direction, buying this company isn’t all that different from them buying Chrysler: I doubt even they know what they’ll do with it. The current strategy is to copy a lot of other people’s stuff (Apple: Vista; Google: Search). They’ve followed others into established markets before, to be sure, but then there was some direction to it. They’re just doing stuff to do stuff.

    As a long time watcher of MS, I have to say it’s pretty clear that Ballmer is grossly incompetent as a CEO. Carly Fiorina was sacked over her performance and he’s done significantly worse for MS than she did for HP. The fact that he’s not been sacked speaks to a board that is failing its shareholders. And I think that’s the why of the stock price. It’s going nowhere because of a Ballmer tax. No one has faith in the value of the company under his leadership and they don’t think he’s going anytime soon because MS has a rubber-stamp board. Buying MS is essentially buying to hold until Ballmer is gone and someone with vision comes to the helm.

    The words of Cromwell to the rump parliament apply to Ballmer and the board:
    You have sat too long for any good you have been doing lately… Depart, I say; and let us have done with you. In the name of God, go.

  18. I think if they rummaged around in the sofa they could’ve found another billion and bought Chrysler instead.

    Given the complete lack of any stated vision or direction, buying this company isn’t all that different from them buying Chrysler: I doubt even they know what they’ll do with it. The current strategy is to copy a lot of other people’s stuff (Apple: Vista; Google: Search). They’ve followed others into established markets before, to be sure, but then there was some direction to it. They’re just doing stuff to do stuff.

    As a long time watcher of MS, I have to say it’s pretty clear that Ballmer is grossly incompetent as a CEO. Carly Fiorina was sacked over her performance and he’s done significantly worse for MS than she did for HP. The fact that he’s not been sacked speaks to a board that is failing its shareholders. And I think that’s the why of the stock price. It’s going nowhere because of a Ballmer tax. No one has faith in the value of the company under his leadership and they don’t think he’s going anytime soon because MS has a rubber-stamp board. Buying MS is essentially buying to hold until Ballmer is gone and someone with vision comes to the helm.

    The words of Cromwell to the rump parliament apply to Ballmer and the board:
    You have sat too long for any good you have been doing lately… Depart, I say; and let us have done with you. In the name of God, go.

  19. WTF!!!!! Softie here and I wake up to this news…amazing. Our execs couldn’t have less of a clue. I hate us I hate us I hate us. This and the meaningless exec shuffleing of BobMu under Jeff Raikes just proves that MSFT is lost, really not executing on any semblance of a plan. The only good that could possibly come from the re-org mentioned would be to get rid of SanjayP. But otherwise, $6B is at least $5B too much…and clearly Wall St. sees it too. (shorting stock, jumping out window)

  20. WTF!!!!! Softie here and I wake up to this news…amazing. Our execs couldn’t have less of a clue. I hate us I hate us I hate us. This and the meaningless exec shuffleing of BobMu under Jeff Raikes just proves that MSFT is lost, really not executing on any semblance of a plan. The only good that could possibly come from the re-org mentioned would be to get rid of SanjayP. But otherwise, $6B is at least $5B too much…and clearly Wall St. sees it too. (shorting stock, jumping out window)

  21. I am far from a defender of the prices that Google has been paying for things.

    Typically, though, Google has been paying in shares of its own stock, which are themselves wildly overvalued.

    Microsoft, in contrast, at least according to the MSNBC article, is paying $6 billion in cash. For a company with reported 2006 profit of $54 million.

    That, my friends, is a horse of a different color.

  22. I am far from a defender of the prices that Google has been paying for things.

    Typically, though, Google has been paying in shares of its own stock, which are themselves wildly overvalued.

    Microsoft, in contrast, at least according to the MSNBC article, is paying $6 billion in cash. For a company with reported 2006 profit of $54 million.

    That, my friends, is a horse of a different color.

  23. I vividly remember sitting in an all-hands meeting about a year ago in my org, when Kevin came in to do a “I’m your new father, Luke” speech.

    He spent some time talking about how advertising was our new business, how we had made so much progress with MSN (Live was just poppping up), and that we were going to be an advertising giant.

    Of the 200 people in the room, I didn’t hear anybody who thought this made any sense. We worked for a company that changed it’s marketing strategy every few months, made gaffe after embarrassing gaffe in the marketplace, and routinely threw millions of dollars at launches with no real means of measuring what worked and what didn’t.

    From that perspective, buying a $54 million product for $6 billion makes perfect sense.

  24. I vividly remember sitting in an all-hands meeting about a year ago in my org, when Kevin came in to do a “I’m your new father, Luke” speech.

    He spent some time talking about how advertising was our new business, how we had made so much progress with MSN (Live was just poppping up), and that we were going to be an advertising giant.

    Of the 200 people in the room, I didn’t hear anybody who thought this made any sense. We worked for a company that changed it’s marketing strategy every few months, made gaffe after embarrassing gaffe in the marketplace, and routinely threw millions of dollars at launches with no real means of measuring what worked and what didn’t.

    From that perspective, buying a $54 million product for $6 billion makes perfect sense.

  25. Joe – I believe that Google paid $3 Billion Cash for Doubleclick. The deal with Youtube was done with stock. I’m pretty sure this is right but I don’t have time right now to find a link.

  26. Joe – I believe that Google paid $3 Billion Cash for Doubleclick. The deal with Youtube was done with stock. I’m pretty sure this is right but I don’t have time right now to find a link.

  27. Joe – I believe that Google paid $3 Billion Cash for Doubleclick. The deal with Youtube was done with stock. I’m pretty sure this is right but I don’t have time right now to find a link.

    Comment by Phil — May 18, 2007 @ 10:45 am

    I agree, it still doesn’t change the fact that they overpaid for doubleclick.

    Google is the darling right now,but I remain unconvinced of their long term prospects, they have to start adding to their buisness model soon, and showing profits outside of the add buisness.

  28. Joe – I believe that Google paid $3 Billion Cash for Doubleclick. The deal with Youtube was done with stock. I’m pretty sure this is right but I don’t have time right now to find a link.

    Comment by Phil — May 18, 2007 @ 10:45 am

    I agree, it still doesn’t change the fact that they overpaid for doubleclick.

    Google is the darling right now,but I remain unconvinced of their long term prospects, they have to start adding to their buisness model soon, and showing profits outside of the add buisness.

  29. Well if you were a shareholder of AQNT then you walked into work today as happy as a pig in crap. that’s about the only people that this makes sense and is good for. i don’t see the rationale at all for paying such a high premium for a company that is making in the 10’s of millions in profit and isn’t in your line of business unless you are afraid of someone else beating you to the punch. i know AQNT had a stellar last quarter but 6 billion bucks. It’s time to start an online advertising company quick. haha

  30. Well if you were a shareholder of AQNT then you walked into work today as happy as a pig in crap. that’s about the only people that this makes sense and is good for. i don’t see the rationale at all for paying such a high premium for a company that is making in the 10’s of millions in profit and isn’t in your line of business unless you are afraid of someone else beating you to the punch. i know AQNT had a stellar last quarter but 6 billion bucks. It’s time to start an online advertising company quick. haha

  31. I think they overpaid, and they’re going to wreck the business just like they did to Hotmail and WebTV. Congratulations to the AQNT shareholders for the cash-out. Take the money and run, guys!

  32. I think they overpaid, and they’re going to wreck the business just like they did to Hotmail and WebTV. Congratulations to the AQNT shareholders for the cash-out. Take the money and run, guys!

  33. Are they NUTS? Heck of a poker bluff on ‘online advertising’. 5.5 billion too much tho….crazy Microsoft, billion here, billion there…

    Yet (hear me out) this is a smart STRATEGIC move by Microsoft, aQuantive is the tracking king, not only that, they will be able to “run the game” and then tell advertisers which key words to target, and they are buying into real account agency talent. The only thing not smart is the the price. But I’d bet 9 out 10 geeks never hearda aQuantive until today. Get outaidea your bubbles sometimes…

    But I still think the online advertising market is in a hecko bubble itself, Google charting up half due to click fraud. Advertisers aren’t getting their money’s worth…start-ups gaming for piece of that pie, not doing the math. Crash City.

    Old McBallmer had a campus
    And on his campus he had some techies, ee i ee i oh!
    With a bill-bill here, and a billion-billion there
    And on his campus he had a search engine, ee i ee i oh!
    With a bill-bill here, and a billion-billion there

  34. Are they NUTS? Heck of a poker bluff on ‘online advertising’. 5.5 billion too much tho….crazy Microsoft, billion here, billion there…

    Yet (hear me out) this is a smart STRATEGIC move by Microsoft, aQuantive is the tracking king, not only that, they will be able to “run the game” and then tell advertisers which key words to target, and they are buying into real account agency talent. The only thing not smart is the the price. But I’d bet 9 out 10 geeks never hearda aQuantive until today. Get outaidea your bubbles sometimes…

    But I still think the online advertising market is in a hecko bubble itself, Google charting up half due to click fraud. Advertisers aren’t getting their money’s worth…start-ups gaming for piece of that pie, not doing the math. Crash City.

    Old McBallmer had a campus
    And on his campus he had some techies, ee i ee i oh!
    With a bill-bill here, and a billion-billion there
    And on his campus he had a search engine, ee i ee i oh!
    With a bill-bill here, and a billion-billion there

  35. This ridiculous, overpriced purcahse will do nothing to stem the tide that is drowning MS is a sea of mediocrity. The axe has fallen. Yahoo and Google are too far ahead to catch up with. Even Ask.com has better ad strategy than MS.

    MS needs to just do what it does best and stick with with Office and what it calls an operating system.

  36. This ridiculous, overpriced purcahse will do nothing to stem the tide that is drowning MS is a sea of mediocrity. The axe has fallen. Yahoo and Google are too far ahead to catch up with. Even Ask.com has better ad strategy than MS.

    MS needs to just do what it does best and stick with with Office and what it calls an operating system.

  37. OVERPRICED!!!

    Check the pockets of those involved in the deal, I smell a couple of billions changing hands under the table.

    CORRUPTION INSIDE MICROSOFT???

  38. OVERPRICED!!!

    Check the pockets of those involved in the deal, I smell a couple of billions changing hands under the table.

    CORRUPTION INSIDE MICROSOFT???

  39. I’m sure they have their reasons for buying aQuantive Inc but I think I would have used the money to put a small down payment on Yahoo. They need to figure out a way to get back in the game and compete with Google and Yahoo.

  40. I’m sure they have their reasons for buying aQuantive Inc but I think I would have used the money to put a small down payment on Yahoo. They need to figure out a way to get back in the game and compete with Google and Yahoo.

  41. First — I stand corrected. Google did pay cash for DoubleClick (per Google’s own website). Unclear what DoubleClick’s earnings were, because at the time they were a privately held company. In 2004Q3, when DoubleClick was public, its quarterly earnings were $15.4 million.

    But, anyway, my position here was never intended to be that Google’s acquisitions were financially smart.

    My point was, and is, that this aQuantive acquisition is not the Microsoft I knew. And, more importantly (to me), it is not the Bill Gates I read about and, let’s be honest, idolized. I can only imagine what the long-time coders toiling away within Microsoft Corp. think when they see money being spent on a scale like this. Six billion dollars represents a lot of people’s raises and bonuses not happening.

    I conclude from the aQuantive purchase the following things:

    1) Bill Gates really has let go of the company.

    2) Google really has gotten under Microsoft’s skin.

    3) Microsoft’s stock can no longer be considered “bluechip.” With Office, Vista, and so on, one might reasonably have believed that Microsoft was entering its large and “steady-as-she-goes” state…nothing spectacular, but predictable, solid earnings growth over the foreseeable short term. With the aQuantive acquisition, Microsoft has signalled that it is not willing to take, or settle for, that road. And, as a corollary, MSFT stockholders must reassess. The company’s leadership is gambling. Is the gamble is on-target or not?

  42. First — I stand corrected. Google did pay cash for DoubleClick (per Google’s own website). Unclear what DoubleClick’s earnings were, because at the time they were a privately held company. In 2004Q3, when DoubleClick was public, its quarterly earnings were $15.4 million.

    But, anyway, my position here was never intended to be that Google’s acquisitions were financially smart.

    My point was, and is, that this aQuantive acquisition is not the Microsoft I knew. And, more importantly (to me), it is not the Bill Gates I read about and, let’s be honest, idolized. I can only imagine what the long-time coders toiling away within Microsoft Corp. think when they see money being spent on a scale like this. Six billion dollars represents a lot of people’s raises and bonuses not happening.

    I conclude from the aQuantive purchase the following things:

    1) Bill Gates really has let go of the company.

    2) Google really has gotten under Microsoft’s skin.

    3) Microsoft’s stock can no longer be considered “bluechip.” With Office, Vista, and so on, one might reasonably have believed that Microsoft was entering its large and “steady-as-she-goes” state…nothing spectacular, but predictable, solid earnings growth over the foreseeable short term. With the aQuantive acquisition, Microsoft has signalled that it is not willing to take, or settle for, that road. And, as a corollary, MSFT stockholders must reassess. The company’s leadership is gambling. Is the gamble is on-target or not?

  43. MSFT is willing to pay this much to acquire a web advertising company. I am wondering how much did DoubleClick say no to?

  44. MSFT is willing to pay this much to acquire a web advertising company. I am wondering how much did DoubleClick say no to?

  45. I love it.

    It’s a great move.

    Anything that pre-occupies MSFT, drains its cash horde, takes it into territories they have no competence in and gives them a false sense of security is great news for the rest of us!

    Go Ballmer.

  46. I love it.

    It’s a great move.

    Anything that pre-occupies MSFT, drains its cash horde, takes it into territories they have no competence in and gives them a false sense of security is great news for the rest of us!

    Go Ballmer.

  47. Hello? Hello? Can anyone hear me? This is Senior Citizen Mr. Invisible, the lowest level of corporate consideration in history.
    Apple has great ads w/chubby “suit”
    representing MS OS and a young man in jeans and polo shirt, the apple OS. One shows MS guy arriving late enormously fat with garbage programs to the point he can hardly walk..characteristic of MS and its OS.
    I survived installing XP Sp2 from ordered
    disk after multiple attempts of downloading. They failed miserably and screwed up my computer. It took [3] Gos to install even with ordered disk.
    PCWorld,in a column, said The RTM team consists
    of two people[and one stuffed monkey] Vs the hundreds
    [?] of programers Microsoft has employed.
    “In other words, a couple of enterprising folks
    have built a better, faster-evolving solution than the world’s largest software company has.”
    Perhaps MS deserves to overpay and continue
    to do a half-assed and pompous job.
    The true pathos comes from the tail wagging the
    dog [tail=advertising] with product/service an
    after thought. What ever happened to “Profit is the
    by product of service!”

  48. Hello? Hello? Can anyone hear me? This is Senior Citizen Mr. Invisible, the lowest level of corporate consideration in history.
    Apple has great ads w/chubby “suit”
    representing MS OS and a young man in jeans and polo shirt, the apple OS. One shows MS guy arriving late enormously fat with garbage programs to the point he can hardly walk..characteristic of MS and its OS.
    I survived installing XP Sp2 from ordered
    disk after multiple attempts of downloading. They failed miserably and screwed up my computer. It took [3] Gos to install even with ordered disk.
    PCWorld,in a column, said The RTM team consists
    of two people[and one stuffed monkey] Vs the hundreds
    [?] of programers Microsoft has employed.
    “In other words, a couple of enterprising folks
    have built a better, faster-evolving solution than the world’s largest software company has.”
    Perhaps MS deserves to overpay and continue
    to do a half-assed and pompous job.
    The true pathos comes from the tail wagging the
    dog [tail=advertising] with product/service an
    after thought. What ever happened to “Profit is the
    by product of service!”