First Take: Microsoft buys aQuantive

Nate Elliott | May 18, 2007, 12:19 PM

As you've no doubt heard, today Microsoft agreed to purchase aQuantive. As usual, I'll point out that I'm not a financial analyst, and so I'll stick to talking about how this deal impacts the companies and their clients, rather than how it impacts investors and stock prices. But there are two things that immediately strike me about this deal.

First, while there's little doubt this is Microsoft's response to Google buying DoubleClick, it's not at all a like-for-like acquisition. In DoubleClick, Google has bought an adserver; in aQuantive, Microsoft has bought an agency.

DoubleClick generate the vast majority of their revenues from adserving, making it a relativley clean acquisition for Google -- the businesses fit together logically. But aQuantive generate more than half of their revenues (58% last quarter) from their agency business, and generate just one-quarter (27%) of their revenues from adserving. That means it doesn't fit into Microsoft quite as comfortably as both copmanies might like.

Even if Microsoft can convince advertisers that there's no conflict of interest here, I just can't see why they'd want to own an agency. Chris Dobson, VP of Global Sales for Microsoft Online Services Group, told me they have no plans to sell the agency business. In fact, he said they were excited to own an agency, to have access to the experience and knowledge that'll help them build better software products for advertisers. Perhaps that's true, but the easiest -- the cleanest -- end to this story is for Microsoft to sell or spin off the agency piece and keep what's most valuable to them: the adserving.

Which brings me to point two: the piece of the aQuantive business that I think really matters to Microsoft, the adserving, is outstanding. aQuantive's adserving division, Atlas, has always been one of the best in the business, with a reputation for very good technology and outstanding customer service. And while clients tell me competitors are catching up, Atlas is still arguably the best advertiser-side adserver in the market. So from the adserving point of view, at least, don't believe anyone who says Microsoft came away with the second prize: the truth is they've done very well here.

Keep in mind that this is just my first take, and that we'll be publishing a formal JupiterTake on this within a few days. And, as usual, you're a client or a member of the media who want to talk more about this, please just get a hold of us.