• by Gavin O'Malley  @mp_gavin, August 10, 2009

Naturally, digital agencies are taking Monday's news of Publicis' plans to buy Razorfish as a warning that they had better be on their toes.

"As part of Microsoft, Razorfish wasn't as focused or as visible," said one agency executive who wished not to be named. "We didn't hear a lot from them in 2008, but we expect to hear a lot more from them now."

Microsoft -- which obtained Razorfish in 2007 as part of its acquisition of aQuantive -- was never comfortable owning an agency in direct competition with so many of its partners.

Now, along with its international reach, analysts agreed that Razorfish will give Publicis a new and greater technological edge, and nicely complement Digitas' creative prowess.

The deal potentially poses the greatest threat to WPP -- which, according to sources within the Publicis rival, had eyed a possible acquisition of Razorfish.

"This definitely gives Publicis an edge," said Greg Sterling, principal analyst at Sterling Market Intelligence.

Publicis has agreed to pay Microsoft $530 million for Razorfish -- partly in cash and partly in treasury shares. In addition, the two titans have struck a five-year strategic alliance that allows Publicis-owned agencies to buy display and search advertising from Microsoft on "favorable terms" in exchange for a guarantee that Publicis will buy a certain amount of ad volume.

The latter condition struck some analysts as a potential point of conflict. "This seems to me to create some tension with the provisions of the Yahoo search arrangement whereby Yahoo will sell 'premium search advertising services for both companies,'" said Andrew Frank, an analyst at research firm Gartner. "Wouldn't most Publicis search buys probably qualify as 'premium?'"

"As well," added Frank, "guaranteed media buys, depending on the scale, might seem to create conflict with an agency's commitment to neutrality in representing clients' media strategies."

Sterling expressed similar concerns. "Yahoo's new premium search agreement with Microsoft could be implicated with this deal," he said. "This might run afoul of that."