Avenue A|Razorfish Brings Microsoft Into Ad Creative

by Gavin O'Malley, May 21, 2007, 6:00 AM

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The divide between advertising technology and creative is ready to shrink with Microsoft's planned acquisition of aQuantive.

The deal in some ways mirrors Google's purchase of DoubleClick and Yahoo's takeover of Right Media. Like those buys, Microsoft will gain tools for publishers and advertisers to better monetize ad inventory, as well as to match campaigns and inventory.

In a twist, however, Microsoft also gets one of the industry's biggest creative digital design firms in aQuantive's Avenue A|Razorfish.

So Microsoft can now not only manage campaigns and maximize inventory, but design ads. In effect, Microsoft becomes a full-service online advertising firm.

Microsoft CEO Steve Ballmer said aQuantive 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."

Joe Doran, general manager of Microsoft's digital advertising solutions unit, said the first priority is to maintain the independence of the agency and the value that it has.

"There are very complementary cultures," said Doran. "We will work very hard and diligently to maintain the independence of Avenue A|Razorfish. They will operate at arms' length, but we see significant value in that."

Some speculated that the agency would be a likely spinoff candidate after the deal closes sometime after July, but Microsoft executives dispelled that notion in a conference call Friday morning.

Agency executives, meanwhile, agreed that Microsoft might be similar to any other holding company with a stable of diverse assets.

"It doesn't seem like that strange a thing," said Rob Smiley, worldwide creative director at TBWA/Chiat/Day. "We live in this weird world of convergence where companies are getting their hands into so many ventures whether there are immediate synergies or not."

Taking an even more matter-of-fact view, agency executive Chris Colbert suggested that Avenue A might not even be on Microsoft's radar. "The reason for this deal probably wasn't Avenue A," said Colbert, co-founder and CEO of the Boston-based agency Holland Mark. Will clients mind it when Avenue A|Razorfish is operating under the umbrella of Microsoft?

"Clients don't really care," said Colbert. "They know the whole holding company structure is so layered and disconnected that it isn't really an issue."

TBWA's Smiley took a slightly different position. "If Microsoft bought us," he half-joked, "we'd probably have to get rid of Apple (a TBWA client)."

Avenue A|Razorfish has seen profits and prospects rise with international expansion this past year through acquisitions in the United Kingdom, Germany, Australia, China, and most recently in Japan through partnership with the country's largest ad agency, Dentsu.

In the fourth quarter, 2006 aQuantive's digital marketing unit, which includes Avenue A|Razorfish, had revenue of $80.6 million--up 50% from the same period a year before. Operating income was $20 million, doubling year-over-year.

Avenue A|Razorfish President Clark Kokich called clients following the deal announcement to say the agency's relationship with them would not change following the deal, according to published reports.

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