Microsoft's New Agency Look
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Microsoft denies that it's buying aQuantive for its technology.
Instead, executives say, the purchase is designed to turn part of Microsoft into possibly the world's largest media company.
You might think that aQuantive's technology could jump-start adCenter. Since it introduced its new advertising platform in May 2006, Microsoft has been touting its eventual ability to let advertisers target ads based on users' behavior within the MSN network. So-called behavioral targeting could make ads more relevant to individuals, and therefore more effective.
But more than a year later, adCenter provides the ability to target ads only by gender, age group or geographic location.
"Age and gender are the first steps on the long-range development of targeting we'll build into the system," Brian Boland, group marketing manager for adCenter, told InternetNews.com. "We don't want to overwhelm the marketplace with too much complexity."
But aQuantive has offered the ability to target ads by users' prior site behavior, purchase actions, demographics, geography and modem speeds since 2004, via its DRIVEpm unit.
Boland said he couldn't comment about where which parts of Microsoft's and aQuantive's technology would sit, adding, "We have great plans for how they fit together to build an ad platform that's the one-stop shop we've been talking about."
That would be a one-stop shop with everything marketers need to run online campaigns -- including the ad space itself, making Microsoft both a buyer and seller of ads. Because it's also getting Avenue A|Razorfish in the deal, Microsoft will also be the largest interactive ad agency.
In the olden days, Web publishers posted content and sold ad space around it. Advertisers could buy space directly from a publisher or hire media agencies to handle buying, trafficking and paying for ads -- such as media agencies like aQuantive's Avenue A|Razorfish division. The ads themselves would often be delivered by ad-serving companies like aQuantive's Atlas or DoubleClick.
To differentiate themselves, interactive media agencies developed or acquired technology to automatically optimize campaigns, reducing placements on pages where nobody clicked, while rotating more ads onto sites or pages that got good responses from viewers. They also developed heavy-duty analytics software that helped advertisers understand which ads and which media did the best job for them.
Today, the largest publishers, formerly known as portals, want to be all things to advertisers. Microsoft's aQuantive buy is actually a late move in the sector's wave of consolidation:
- Google acquired DoubleClick for $3.1 billion.
- Yahoo bought what it didn't already own of RightMedia, a marketplace where advertising networks could buy and sell inventory.
- AOL purchased Third Screen Media, a mobile-advertising network and mobile ad-serving and management-platform provider.
- AOL acquired ad-serving company Adtech AG.
- AOL bought Tacoda, an ad-server that can target ads to consumers based on their online behavior.
Microsoft has insisted that the two companies have complementary capabilities and that the acquisition doesn't eliminate a competitor. At the same time, it's complained that Google bought DoubleClick to eliminate competition and gain control of the market for serving ads to Web publishers.
But in its SEC filings, aQuantive lays out the parallels between Google's and Microsoft's acquisitions. According to its most recent 10-K, Atlas competes with DoubleClick, as well as with providers of management tools for search engine marketing.
At the same time, according to aQuantive's filing, Avenue A|Razorfish competes with both ad agencies and media companies. Finally, aQuantive said it competes directly with ad-sellers including AOL, MSN, Yahoo and Google.
This deal gives MSN a lot more ads to sell.
On Monday, Microsoft said it would open its beta contextual advertising service to all advertisers in the United States. ContentAds, available on a few high-value MSN areas including Real Estate and Money, let marketers place pay-per-click ads targeted by keyword alongside articles and other content.
ContentAds opens up the rest of the MSN properties "to adCenter advertisers," Boland said. "It offers them additional distribution for the same ads." He said MSN will look for additional content partners outside of MSN where ContentAds can be distributed.
Such as Match.com, Citysearch and Evite? On August 3, aQuantive's Atlas unit announced it had landed a multi-year contract to provide media ad-serving technology for a number of IAC properties, reaching a total of 60 million users each month.
Microsoft once again reorganized, creating the Advertiser and Publisher Solutions (APS) Group to handle all ad platforms. Brian McAndrews, former CEO of aQuantive, will run APS. Steve Berkowitz, the former CEO of Ask.com, will remain head of the Online Services Group, focusing on building out and improving the MSN.com portal, Windows Live services and Live Search -- but no longer selling ads for them.
AQuantive is clearly an ad-selling and ad-serving powerhouse, and it could make that $6 billion price tag look like a bargain.