In what is proving to be the most concentrated--and highest-valued - feeding frenzy of digital advertising services companies ever, Microsoft today announced a deal to acquire aQuantive, Madison Avenue's last big independent digital shop, for $6 billion. The deal comes on the heels of a breathless buying spree that has included Publicis' $1.3 billion acquisition of Digitas, Google's $3.1 billion acquisition of DoubleClick, and various smaller, but nonetheless important strategic buys that are reshaping the infrastructure of the digital marketing services industry. Microsoft's move represents a double-threat as aQuantive is both a huge advertising services company via its Avenue A / Razorfish unit (representing roughly two-thirds of aQuantive's revenues), as well as a formidable ad-serving business via Atlas. Both represent important strategic diversifications for the software giant, which has tried and failed to gain a dominant position in the online industry beyond the browser market. MSN continues to be an also-ran in both search and publishing, and Xbox, while a wildly successful videogame platform, hasn't proved to be the Trojan horse Microsoft had expected it to be into online content and advertising services. In terms of the ad server market, Microsoft's deal takes out Atlas, the last remaining server with scale, and comes on the heels of DoubleClick's acquisition by Google, AOL's acquisition of Adtech AG and WPP Group's acquisition of 24/7 Real Media. The result is a strange new breed for digital marketing mongrels: Microsoft, a software giant is now part ad agency, part ad server. WPP Group is now part ad agency, and part ad server. And while Google disavows that it is morphing into an ad agency, it is certainly beginning to offer traditional media services functions, and now owns the biggest ad server in the market. It's also unclear what Microsoft's ownership of an ad agency will mean for Avenue A / Razorfish's relationships with its clients, or Microsoft's relationships with other agencies. But Microsoft chief Steve Ballmer says it is all par for the new Madison Avenue course. "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," he said of today's deal, adding that it, "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." But the deal also means that Microsoft is now competing directly with conventional advertising agencies, much as other big media companies have begun doing in the past year, including Meredith, the big magazine publisher and broadcast concern that has acquired not one, but three digital marketing agencies: O'Grady Myers; Genex; and New Media Strategies. AOL, meanwhile, has acquired Third Screen Media. As far as deals go, Microsoft's is the biggest yet, but even at $6 billion it represents a mere pittance -- 2% -- in terms of Microsoft's $293 billion market value. Interestingly, that's about the same percentage of Google's $147 billion market cap that its $3.1 billion DoubleClick acquisition represents. By comparison, WPP's $649 million acquisition of 24/7 Real Media was downright dilutive, representing 3.5% of WPP's $18.8 billion market value. Does the frenzy make sense? Just ask WPP's Sir Martin Sorrell. When someone posed him that question during Thursday's conference call on his 24/7 deal, he implied it might take more than 24 hours, or even seven days to bear fruit. "Just wait," he said. "Be patient. Be a little bit patient."
Google's recent moves--from its multimillion-dollar acquisitions of YouTube and DoubleClick to its foray into in-game advertising--have led to industry speculation about the company neglecting search in its pursuit to become the dominant Web portal. The rollout of its universal search model would seem to dispel those thoughts, but at the same time sparks another debate--namely, what does it mean for the future of today's search engine optimization and search marketing industry? "I think it underscores our value," said David Berkowitz, director of emerging media at 360i. "Google has really upped the ante on competition for space on that first page, which makes it that much more important for companies to have every last one of their assets optimized. And the more challenging SEO is, the less likely a company is to do it in-house." Indeed, Google's new universal search capability reinforces the "holistic" approach to search engine optimization that many in the industry have been impressing upon their clients. While it may have some residual effects on client search campaigns, "it's not really a sea change for advertisers," said Anthony Iaffaldano, director of marketing, Reprise Media. Search engine marketing and optimization firms will continue to emphasize the necessity of having correct metadata on everything from product images to video to the company blog, observers said. Some in the blogosphere, however, have derided universal search from both a user and advertiser standpoint. On searchenginelowdown.com, for example, yesterday's post was titled "Google Universal Search: Rendering #1 Useless Since 2007." Others noted that factors such as the popularity of a specific kind of media may influence the relevance algorithm, causing Google to produce more results that may not accurately reflect the intent of the searcher or the advertiser. But according to Gord Hotchkiss, president and CEO of Enquiro, the shift to "prospect-centric" campaigns may be the most difficult transition for the search marketing industry. "Search marketers have always tried to control a fairly static piece of real estate--space on a results page--and the touchpoint with the user was pretty easy to understand. With universal search, marketers have to pay much more attention to the person doing the query and what's going on in their mind. They have to relinquish control--which will be very hard to do," said Hotchkiss. And with Google executive Marissa Meyer acknowledging the possibility of rich media ads, the future could mean paid search ads competing with display ads on the same page--even more of a gray area for online advertisers to consider.
Ending weeks of speculation, WPP Group on Thursday announced plans to buy online ad company 24/7 Real Media for $649 million in cash. WPP, the world's second-largest marketing services company, is paying $11.75 per share for the company, which amounts to a 30% premium over 24/7's average closing price for the past two months. "The real catalyst for this was the Google/DoubleClick move (a $3.1 billion deal) and other things coming down the pike," said Martin Sorrell, WPP's chief executive, during a call with analysts. Recent weeks have also produced Yahoo's $680 million acquisition of Right Media and AOL's purchase of German ad network AdTech AG. Microsoft, which lost out on the DoubleClick deal, was also said to be bidding at one point for 24/7. "You can call it a tipping point, if you want," Sorrell said. "We see larger clients looking at this area with greater intensity. There will be a faster shift in the future to the Internet." David Moore, chairman and CEO of 24/7, said his company had been working with WPP for 12 months on various online ad projects. That some sort of deal was imminent became clear last week when 24/7 said it had hired financial adviser Lehman Brothers to suss out potential suitors. A pioneer in digital advertising, 24/7 experienced organic revenue growth of 43% in 2006 and has a global footprint for its media, search and technology offerings. With 20 offices in 12 countries, it derives 61% of its revenues from outside the U.S. With 24/7, WPP is getting a highly scalable technology platform in which to integrate all of its digital advertising, said Dave Morgan, who founded Real Media back in 1995 and is now chairman of the behavioral targeting firm Tacoda. (Morgan left Real Media in 2001, shortly before it merged with 24/7 that same year.) "This is a strong, forward-thinking move for WPP," said Morgan. "Instead of buying Digitas or another ad agency, WPP is gaining the upper hand in ad serving so it won't have to defer to Google or aQuantive in the future." "We are looking forward to working with the team at 24/7 Real Media to bring their relationships, skills and technologies to our operating companies and people for the benefit of our clients," said Mark Read, strategy director, WPP and CEO of WPP Digital. WPP's network of marketing services companies presently includes media agencies MediaCom, Mediaedge:cia and MindShare; creative agencies Grey Worldwide, JWT, Ogilvy & Mather and Young & Rubicam; and interactive specialists Outrider and GroupM Interaction, among others. "We focus on creativity and media," Sorrell said. "This adds a further dimension. It's the application of science to our business. We think this is increasingly important." Analysts on Thursday immediately began speculating on the deal's impact, and the likely acquisitions to follow. "This ties a rich information force to a strong sales and marketing force," said Gordon Borrell, president of research firm Borrell Associates. "If I were a competitor of WPP's, I'd be shaking in my hooves right now." Unfortunately for WPP's rivals, there aren't that many data-rich ad companies left to buy. The short list includes ValueClick and aQuantive--neither of which would comment on 24/7's acquisition on Thursday. (Shares of ValueClick rose 2% to $27.88 at the New York close, while aQuantive's registered a 4.27% jump to $35.87.) One agency executive who wished not to be named predicted that rich media companies would take this as an opportunity to branch into standard ad serving. But, the executive added, "there are clearly more agencies than ad servers right now." In addition to $637 million that 24/7's shareholders are receiving, unvested stock and options are valued at $49 million and net cash is expected to be about $37 million at closing, to value the company at $649 million, WPP said in a statement. "We've found ourselves drawn closer to the advertiser," Moore said on Thursday, regarding 24/7's reason for joining WPP. "We thought a marriage with a company like WPP would be ideal for our strategy going forward." Other recent agency deals include Paris-based Publicis Groupe buying online advertising agency Digitas. More recently, Interpublic bought search agency Reprise Media. "Our existing businesses are not asleep in the digital area," Sorrell emphasized. The goal is for WPP to draw as much as a third of its revenues from digital sources, and this acquisition is a way to accelerate that process. "We think it's a tremendous opportunity," said Rob Norman, CEO of Group M Interaction Worldwide, WPP's online media-buying entity. "Clearly we will look at the full scale of tools we can use in an IT landscape from campaign management to bid management." That said, Norman added, 24/7's media network will sit separately to keep its online buying neutral. "We won't be trying to influence our planners in that direction," he emphasized.
Following a meeting with the Internet Advertising Bureau, both Nielsen//NetRatings and comScore on Thursday said they were moving forward in the Media Rating Council Accreditation process for Internet audience measurement methods. The measurement firms shared their plans Wednesday at a meeting hosted by the IAB, and attended by a number of industry organizations including the American Association of Advertising Agencies, the Association of National Advertisers, the Advertising Research Foundation, the Online Publishers Association, and the MRC. Wednesday's meet-up resulted from an open letter sent by the IAB last month to comScore and Nielsen//NetRatings asking both firms to consider external audits. Additional agreements and conclusions are expected to be revealed next week, according to Marla Nitke, IAB's director of marketing communications. "A more formal announcement with details will be released jointly with the IAB in the near future," added a comScore spokesman. Both comScore and Nielsen issued initial public responses soon after the IAB issued its open letter on April 20. Nielsen//NetRatings said it was in the process of securing third-party certification of its methodologies, and that it had already completed the Media Rating Council's pre-audit. comScore said it had recently opened its methodology to an evaluation by the Advertising Research Foundation, and that it planned to release the results publicly in the near future.
Chevrolet has signed on as the first global sponsor of LiveEarth.MSN.com, Microsoft's newly enhanced Web site for the upcoming Live Earth concert series. Using video, photo galleries, and lifestyle content from publishers such as thedailygreen.com and TreeHugger, MSN seeks to foster an online community dedicated to combating the climate crisis--all culminating with the simultaneous Web broadcast of the global Live Earth concerts on July 7. In addition to providing streaming video, MSN will host interactive maps that allow users to see concert cities and venues in real time. "Live Earth is about engaging a global audience with tools to tackle the climate crisis," said Kevin Wall, Live Earth founder and producer. "And LiveEarth.MSN.com is the only place where people can join our movement anywhere, anytime." MSN will integrate the Chevy brand throughout the site, with display ads across linked platforms such as Windows Live Spaces, Messenger and Hotmail, where users can download wallpapers, upload videos and post blogs to voice their environmental concerns. According to Lisa Curry, senior director, MSN, Chevrolet will sponsor green content across the entire MSN network, including portals such as MSNBC, MSN Money, Autos, and Health, among others. As part of the launch, MSN is offering site visitors exclusive access to Madonna's new Live Earth-inspired song "Hey You." The company will donate 25 cents for each of the first million downloads to Alliance for Climate Protection in support of Live Earth.
In a move marking DailyCandy's strength as a leading vehicle for marketers seeking to reach young female influencers, the publisher yesterday hired two executives who had previously worked together growing New York Times Digital for nearly 10 years: Catherine Levene as chief operating officer and Alyson Racer as vice president of ad sales. The COO job had been vacant for a year while Racer's position is new at the company. Levine was most recently senior vice president at TheFind.com, and previously vice president of product, business development and strategy at New York Times Digital. Racer was most recently vice president of advertising at New York Times Digital, ten years after joining there as the Times' first-ever online sales rep. DailyCandy CEO Pete Sheinbaum, who had also been running operations and ad sales, said he undertook an exhaustive search to find qualified candidates who not only had the right skills, but the right "cultural perspective" for a property dedicated to the latest news in fashion, food, culture and fun for young, single urban women in their mid- to late 20s. DailyCandy, whose flagship email newsletters currently boast more than 2.4 million subscribers, attracts links and banner advertising from such companies as Ford, Loreal, Estee Lauder and Nike, along with local marketers in its daily targeted editions covering 11 major U.S. cities and London. The company also publishes a national edition and three separate weekly editions covering travel, kids and shopping deals. All subscribers also receive a weekly dedicated email on behalf of one of DailyCandy's advertisers. "Most of our marketing partners feel we've captured a large group of influencers," said Sheinbaum, noting that DailyCandy appeals to advertisers who "want to start trends and move products." Not only do they want to reach the 2.4 million subscribers, but also email's equivalent of "pass-along" readership through online's viral element. Magazines are one of the publisher's main competitors for advertising to its target audience, and Sheinbaum said he's "seeing dollars starting to move over" from such publishers as Conde Nast, Hearst and Time Inc. He attributed this to email's greater flexibility and the ability to track and measure how ads perform. Sheinbaum said advertisers have also been asking for the advantages of Web site advertising, such as its rich media aspects, so DailyCandy.com will be overhauled this summer with new functionality, better ease of use and more search capabilities. He's also looking to add online video segments. Sheinbaum explained that the site once served mainly as a way for readers to sign up for the email newsletters, but in the seven years since DailyCandy launched, so much content has been accumulated that young women "looking for things to do in cities they haven't been to before turn to DailyCandy first." Also on the horizon for DailyCandy are new platforms, following last year's mobile launch, and new cities, both domestic and international. Sheinbaum said he also wants to grow the brand through new TV, radio and print tie-ins. As a private company, DailyCandy doesn't release revenue figures, but Sheinbaum noted that 90% of revenues come from advertising and that subscriber growth has been about 7% annually, And a spike is coming--the time of the year when new female college grads move to New York and other large urban centers, and turn to his email publications for the latest in what to do and buy.
Never wanting to be the last at anything--although I acknowledge that I am often the last to know nearly everything--I have decided to join Johnson & Johnson, Coca-Cola Co. and probably Unilever, and pull out of the TV upfront. Unlike the other megabrands whose media deals have become more complex, including branded content, original content and other types of integration with other media, I am not pulling out of counting on major TV deals year-round. No, I am pulling out because I am tired of shrimp. For more years than I can count, I've been to "groundbreaking" upfront presentations, allowed the networks to shower me with baksheesh--er, I mean gifts--dazzle me with cheesy entertainment and strained comedy. I've tried to maintain a cordial demeanor while listening to net chiefs forecast smash-hit status for shows with scripts so bad they wouldn't make the remainder bin at Barnes & Noble--and would still be on the shelves after the local library's "all you can carry for free" day that ends their annual fundraiser. I've watched emerging stars and has-been stars and athletes and net execs strain to remember their lines and emote with all the spontaneity of the James Madison Grammar School production of the "Princess and the Pea." But mostly, I am tired of shrimp. Over the years I have bought into the upfront hype and committed a fair amount of the George H. Simpson Communications marketing budget to prime-time programming, wondering why I should pay more for less audience each season. I have seen a gradual but steady decline in audience inquiries, even when I sprang the big bucks for "Grey's Anatomy" and "American Idol." Which, by the way, greatly improves the quality of the lunches the net salesguys buy you--and the location of your seats at Yankees, Rangers and Knicks games. I had a pretty good time at the Olympics with NBC and loved the Fox spa trips, although I repeatedly turned down NASCAR boondoggles since I think all that driving around in a circle kind of a pointless waste of gas. A few years ago, I started to dabble in online advertising. At first it was pretty cool... the rooftop parties, the concerts in ballparks and the free trips to Sunnyvale, Redmond, Dulles and San Francisco. I was overwhelmed with tote bags, T-shirts, baseball caps, pens, mouse pads, and sushi. Then the bubble burst and golf outings turned into drinks, and lunches moved from Le Bernardin to Irish bars. But oddly, the ROI on my marketing spend improved substantially. As the industry progressed from banners to rich media to behavioral targeting, I found that I spent less and got more. The quality of my leads increased. In spite of click fraud, which is in some ways analogous to TV remote controls and DVRs, I could see from my search marketing spend who was converting and who wasn't. I could tell who was watching my online videos and could change my offers to optimize my revenue. No longer was I sweating the overnights and accepting make-goods on TV audience shortfalls. Life seemed better. So, here we are again. Another round of lavish parties, trite presentations, moronic sitcoms, police and hospital dramas, sci-fi shows--and, yes, shrimp. I think I'll pass. The story you have just read is an attempt to blend fact and fiction in a manner that provokes thought, and on a good day, merriment. It would be ill-advised to take any of it literally. Take it, rather, with the same humor with which it is intended. Cut and paste or link to it at your own peril.