Microsoft pays $6B for online ad company
(AP)Updated: 2007-05-20 11:19
NEW YORK - Microsoft Corp., not wanting to get left behind rivals in an online advertising boom, agreed to pay $6 billion in cash to acquire aQuantive Inc. on Friday, a leading agency for Internet ads which also has powerful technology that serves display and banner ads to other Web sites.
 Stock prices for Microsoft and aQuantive are shown at the Nasdaq marketsite on Friday, May 18, 2007 in New York. Stock prices for Microsoft and aQuantive are shown at the Nasdaq marketsite on Friday, May 18, 2007 in New York. [AP]  |
The deal caps a month of furious activity in the sector which began in mid-April with Google Inc.'s $3.1 billion purchase of DoubleClick Inc., a company that provides technology used by Web site publishers to deliver advertisements to viewers.
Google is already the leading provider of keyword search advertising, which suggests "sponsored" links along with search results. Companies like DoubleClick and aQuantive help provide the delivery of "display" ads on Web sites such as banners and boxes, which lead users to advertiser's Web sites.
For Microsoft, getting aQuantive could jump-start its online advertising business, which lags far behind Google and Yahoo Inc. (Nasdaq:YHOO - news) due to the lower traffic on its own destination Web site, MSN. The deal "certainly keeps them in the competitive arena with Google," A.G. Edwards analyst Denise Garcia says.
aQuantive's technology will allow Microsoft to deliver ads to third-party Web sites, something that should mesh with Microsoft's existing plans for delivering ads onto other platforms such as video games on its XBox, which connects to the Internet. Microsoft currently delivers ads mostly to its own Web sites, such as MSN.
aQuantive also has a significant interactive advertising agency called Avenue A / Razorfish, which buys, sells and creates online advertising - much like a traditional advertising agency, but online.
Microsoft, whose MSN site has struggled behind search leader Google and also Yahoo, is hoping the acquisition will help 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.
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 talk about other bidders.
Piper Jaffray analyst Aaron Kessler estimates the online
advertising market to be worth about $25 billion this year. Over the next five
years, Kessler said he expects annual growth of about 17 percent.
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