Online advertising: small innovators swallowed
Microsoft has been more restrained than most when it comes to making major acquisitions. But the $6 billion acquisition of online advertising company Aquantive is a big step for Microsoft. The deal will give software and agency services that will support Microsoft's drive to catch up with Google in what has proven to be a surprisingly lucrative market. Acquantive owns agencies, market research, and technology assets. It has been an acquirer of smaller fish, both in the UIUS and abroad and now is part of a bigger buyout.
Only a month earlier, Google outbid Microsoft to buy DoubleClick Software, another online ad firm for $3 billion. DoubleClick is an agency that specializes in banner and display ads, generally for promoting brand awareness.
In two other deals, Yahoo bought full interest in Right Media, an online ad exchange ($680 million). And the UK's WPP marketing group bought 24/7 Real Media ($650 million), also in the dame business.
The reason for the frenzy is not hard to see - Internet advertising is very hot. According to a Financial Times story ("Feeding frenzy may lead to limited choice", 3/19/07), Online advertising is "expected to account for 8 per cent of all global advertising this year."
But, as the article notes, companies like Microsoft, Google, and Yaho0 have severe conflicts of interest. They are both buying agencies and providing the location where ads are placed. It's as if News Corp. or Viacom also owned the agencies that made the commercials and bought ad time. Does this mean that advertiser who use the Avenue A/Razorfish agency (a division of Acquantive) be steered to MSN advertising and away from Microsoft rival Google? Will DoubleClick customers be steered to Google and away from Yahoo and MSN?
The FT article quotes one Microsoft exec as saying "Agencies have to be absolutely squeaky clean…"If a client got a whiff of favouritism in the way agencies were booking campaigns, they would lose the business. It would be suicide." But theoretical firewalls, however instituted, are naturally subject to erosion, as initial good intentions fall under the weight of making this quarter's numbers. These are vertical expansions that make no long-term sense, at least for the customers of these agencies.
4:08:39 PM 
|
|
