May 20 2007

Microsoft spends $6bn on digital marketing business

Microsoft is buying digital marketing firm aQuantive for $6bn (£3bn), as it details plans to build and internet-wide advertising platform for advertisers, publishers and ad agencies.

Microsoft says that despite the high price (some 85% higher than aQuantive's closing share price), the deal is worth it because of aQuantive's complementary technology. The BBC reports that analysts are sceptical. Microsoft shares dropped following the deal while aQuantive's rose by 78% (to a level still below the price paid by Microsoft).

Steve Ballmer, Chief Executive Officer of Microsoft said: "The advertising industry is evolving and growing at an incredible pace, moving increasingly toward online and IP-served platforms, which dramatically increases the importance of software for this industry."

Continuing, he said that this announcement "represents the next step in the evolution of our ad network from our initial investment in MSN, to the broader Microsoft network including Xbox Live, Windows Live and Office Live, and now to the full capacity of the Internet. Microsoft is intensely committed to creating a thriving advertising business and to partnering closely with all key constituencies in this industry to help maximize the digital advertising opportunity for all."

aQuantive businesses include interactive agency Avenue A | Razorfish; Digital Marketing Technologies (DMT), made-up of Atlas and its Atlas Search, Atlas Rich Media and Atlas Publisher divisions; Digital Performance Media (DPM) including DRIVEpm, European-based MediaBrokers and Franchise Gator.

Is this a good move for Microsoft or is the company worried about its online business being left behind?

Emma Herrod