Robert McLaws: Windows Edition

Blogging about Windows since before Vista became a bad word

aQuantive Acquisition Talking Points

These talking points on the aQuantive deal hit Microsoft employee mailboxes this morning.

The deal is an extension of Microsoft’s big bet on the online advertising space.  With a total value of over $500 billion, $40 billion of which is online, there is tremendous opportunity to not only drive future growth for the company, but also to provide this industry with tools and services that will help advertisers generate the highest possible return on their ad investments and will help publishers maximize their revenue.

Our merger with aQuantive will enable the new team to strengthen our relationships with advertisers, agencies and publishers by enhancing our current advertising platform with complementary technologies.  For the first time, we’ll be offering display advertising solutions for all ad agencies and publishers on any websites; providing a choice while, growing the addressable market for Microsoft products and services. 

With these new assets, we also increase our capabilities to build and support next generation advertising solutions and platforms such as cross media planning, video-on-demand and IPTV.

While the talking heads will go on and on about how the deal was way to expensive, consider this: by purchasing a company with existing clientele and an extensive offline presence, Microsoft gains significant competitive marketshare without having to build it. This is in line with Microsoft's usual acquisition strategy. Between hiring, infrastructure, new offices, advertising their services, shuttling around sales people, etc... Microsoft could have easily spent $6B building out an offline ad network themselves, and wasted 5 years doing it. $6B may be a premium against aQuantive's current stock price, but it's not against what it would have cost to compete in the space.

I've seen GigaOm's Kevin Kelleher try to reason it out through an HR perspective. I find it funny, because Microsoft didn't pay a premium for the employees, although I hear they are very good. No, Microsoft bought the portfolio, which at $500B worth of advertising, sounds like it was well worth it. With less than 10% of it's advertising value in the online space, the aQuantive acquisition was not about online ads. It was about expanding the adCenter and Massive properties by adding an offline component to the mix.

For an outstanding breakdown of the deal, Sanjay Dalal's extensive analysis is well worth a read (thanks for the charts!)

[via Kevin Sanger]



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