With $6 million buy of Aquantive, Redmond’s chief advertising strategist says company does not need to acquire more assets to succeed.
Microsoft Corp., after agreeing last week to pay $6 billion US for aQuantive Inc., to gain a strong foothold in the online advertising business dominated by its rivals Google and Yahoo.
Speaking at the Goldman Sachs Internet Conference in Las Vegas, Microsoft’s chief advertising strategist, Yusuf Mehdi, said “We have all of the pieces we need to move forward” and be one of the top ad platforms, he further added that the company was already bigger than Yahoo in terms of users of its Web services like e-mail and instant messaging.
Earlier this month, several newspapers reported that Microsoft has held talks with Yahoo about a possible partnership to develop Web search and advertising programs to fight Google Inc. People briefed on the discussions said Microsoft was considering a deal worth an estimated $40 billion to $50 billion, to acquire Yahoo.
The acquisition of aQuantive Inc., owner of the largest online ad agency, has played down a possible deal with Yahoo Inc. and it is a “game changer” for us as sales of Internet advertising rise, Mehdi said.
Still, some Wall Street analysts said Microsoft needed to buy an established Internet player such as Yahoo to gain scale to take on Google.
When asked by Goldman Sachs analyst Anthony Noto whether there would be assets from Yahoo that could help Microsoft, Mehdi said, "From where we are today, I think we have all the pieces."
Online ad sales rose 35 percent to $16.9 billion in the U.S. last year, the Interactive Advertising Bureau said, citing a survey conducted with the accounting firm PricewaterhouseCoopers LLP. Fourth-quarter Internet ad spending reached a record $4.8 billion, a 33 percent gain. The Web accounted for 5.9 percent of all U.S. ads spending, up from 4.7 percent in 2005, the bureau said.
Microsoft’s Mehdi said aQuantive gives the company a strong position in serving up display ads on Web sites using technology that provides behavioral targeting. This is an area, according to Mehdi, that is experiencing more growth than ads tied to Web search results.
Google, which has built a multibillion-dollar advertising business largely on the back of its dominant position in Web search, continues to gain market share in search. Google’s advertising revenue is growing three times faster than Microsoft’s and Yahoo’s.
Microsoft and Sunnyvale, California-based Yahoo have struggled to dent Google’s dominance in online searches and in the booming market for advertising spots next to search results. Combining with Yahoo would triple Microsoft’s share of the U.S. search market to 38.4 percent, rivaling Google’s 48.3 percent, according to ComScore Inc, Bloomberg reports.
"It is no longer just about search," Mehdi said. "Search and display have essentially converged."
Microsoft is readying new features for its service that will give Mountain View, California-based Google “a run for their money,” Mehdi said.