New York – Microsoft took a deep plunge to broaden its digital online advertising horizons, paying $6 billion in cash and a massive 85 percent premium to snap up one of the last major players in the sector, a Quantive Inc.
Microsoft moved forward to get a better foothold in the red-hot online advertising market, agreed to pay $6 billion to buy Internet marketing firm aQuantive Inc. in an effort to capture a bigger role in the nascent Web video market and increases pressure on competitors to make acquisitions of their own.
Microsoft agreed to pay $66.50 per share for the Seattle-based company, a sizable 85 percent premium over the Thursday closing price of $35.87. The all-cash deal is expected to close early in 2008, assuming regulatory and shareholder approval.
The acquisition is Microsoft’s largest ever. aQuantive operates three separate businesses dedicated to the online marketing space — Avenue A | Razorfish, which produces creative content for interactive ads; digital marketing technology unit Atlas; and DRIVEpm, a publishing system billed as performance media, marking the latest and largest deal in a merger-and-acquisition frenzy aimed at staking a claim in the converging worlds of traditional and online advertising.
The deal came just one day after another online ad company, 24/7 Real Media Inc., was acquired for $649 million by advertising conglomerate WPP Group PLC and is the clearest proof yet of the urgency that technology and media companies feel about getting a piece of the online advertising boom.
The all-cash takeover will allow Microsoft to expand into the highly lucrative internet advertising market that Google and Yahoo have targeted.
Microsoft Corp., whose MSN site has struggled behind search leader Google Inc. and Yahoo Inc., is hoping that the acquisition of aQuantive will jump-start its own efforts to sell and deliver advertising on the Internet, a business that is on pace to grow nearly 30 percent this year, way ahead of other forms of advertising.
With the deal, Microsoft gets a company based in its own backyard — which may help with integration and transition issues — and joins the long list of companies that have made purchases in the interactive ad space in the past few weeks.
The integration of the company would enable Microsoft to offer one of the most comprehensive interactive advertising platforms available, Microsoft said, with a current and future reach that includes Xbox Live interactive games, IPTV broadcasts and video-on-demand.
The deal caps a furious four weeks of deal-making in online advertising, kicked off by Google’s acquisition of a leading advertising company DoubleClick Inc. in mid-April for $3.1 billion. Microsoft was said to have been interested in DoubleClick but got trumped.
Kevin Johnson, the head of Microsoft’s platforms and services division, which includes the Windows operating system and online services such as MSN, said there was a “competitive process” to acquire aQuantive, but he declined to say who the other bidders were. “We are delighted to have won,” he said.
The move lets Microsoft go beyond its own Web properties — principally the MSN portal as well as its Live on-demand software offerings — to embrace “the full capacity of the Internet,” said CEO Steve Ballmer.
The advertising industry is evolving and growing at an incredible pace, moving increasingly towards an online and IP-served platform, which dramatically increases the importance of software for this industry, he added.
Both Microsoft and aQuantive are based in the Seattle area, aQuantive and its 2,600 employees will continue to operate from its headquarters under the auspices of the Microsoft Online Services Business, the companies said.