Microsoft has taken a step forward in its battle with Google in the online advertising market by closing its acquisition of aQuantive. Google has still to close its comparable DoubleClick acquisition.
At $6bn, it is the biggest acquisition Microsoft has made but it equates to a major opportunity for the company. Microsoft aims to build a complete advertising platform capable of working across different devices and media, that will serve the needs of advertisers, publishers and users. It is aiming to secure a share of the $40bn online advertising opportunity and the $600bn advertising market that the likes of Google and Yahoo are also chasing.
When the deal was announced in May the $6bn price tag was considered high. However, it was felt that Microsoft had to pay up to close to gap between it and Google, and to prevent someone else buying the company. The $6bn is 67 times earnings and a revenue multiple of 7.6, based on projected 2008 figures.
However, Microsoft is clearly taking a long-term view. Although the price is substantial it should be seen in context as Microsoft derived $2.47bn in online service revenue during its last fiscal year.
Microsoft’s offer for aQuantive came a month after Google made its play for DoubleClick, making it look like a reactive move. The Google/DoubleClick deal has yet to close.
To enable it to make the most of its purchase, Microsoft has created the Advertiser and Publisher Solutions Group. Its task will be to build a monetization engine to serve the advertiser and publisher community.
It will also build and market all advertising platforms, including Atlas, DRIVEpm, MSNDR and Microsoft AdCenter, plus new media types such as in-game and mobile ads, and the agency arm Avenue A/Razorfish. The MSN.com portal, Windows Live services and Live Search will come under the purview of the new group as well.