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DEL.ICIO.USBig deals rock online ad world
The Atlanta Journal-Constitution
Here we go again, another huge online purchase. Microsoft today bought the Internet ad services firm aQuantive for $6 billion. Why aQuantive? It owns two major players — the marketing ad services firm Avenue A/Razorfish and ad-management technology provider Atlas. The Microsoft offer was reportedly more than 80 times aQuantive’s projected earnings this year.
What’s the hurry and why so much money?
First, there’s the competition. Google bought DoubleClick last month for $3.1 billion. Yahoo spent $680 million to finish its buyout of Right Media. (Disclosure: Cox Newspapers is a member of the consortium working with Yahoo on ad issues.) Just this week, AOL acquired the German firm Adtech AG and ad agency WPP group bought 24/7 Real Media. The major ad-serving companies are now snapped up.
Then, there’s the strategy. Kara Swisher of The Wall Street Journal writes today on her Boom Town blog: “As more ad spending shifts online, the ability to have expertise and to innovate quickly will become critical. What all these companies are buying — besides stronger relationships with advertising clients — are people and experience.”
Also, as Media Post editor Joe Mandese points out, these huge sums for acquisitions are drops in the bucket for the giants. Microsoft and Google paid no more than 2 percent of their market value for their acquisitions. Yahoo even less. WPP paid 3.5 percent of its market value.
So what’s next? As Mandese sees it: “The result is a strange new breed for digital marketing mongrels: Microsoft, a software giant is now part ad agency, part ad server. WPP Group is now part ad agency, and part ad server. And while Google disavows that it is morphing into an ad agency, it is certainly beginning to offer traditional media services functions, and now owns the biggest ad server in the market. “
We’ll let Microsoft platform and services unit head Kevin Johnson have the final word as he told Cnet today: “The online advertising market today is one that is $40 billion worldwide and projected to grow at a 20 percent rate per year over the next few years. It is a significant opportunity.”
Indeed.
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