• by Laurie Petersen , August 14, 2007

Just in case paying an 85% premium were not enough, Microsoft showed it is serious about becoming a dominant force in advertising by creating a new Advertiser and Publisher Solutions Group and naming aQuantive CEO Brian McAndrews to lead it.

Former ABC executive McAndrews will continue to be based in aQuantive's Seattle headquarters, but will also keep an office in Redmond. Mike Galgon, an aQuantive co-founder, becomes the new chief advertising strategist.

The new appointments were part of a reorganization announced Monday morning following the close of the $6 billion deal--Microsoft's largest ever. Later in the day, Microsoft also closed on the acquisition of ad exchange AdECN, which will continue to operate as a wholly owned subsidiary from Santa Barbara, Calif.

McAndrews will report directly to Kevin Johnson, president of Microsoft's Platforms & Services Division. In May, when the deal was announced, McAndrews likened it to a switch from "gasoline to rocket fuel" in accelerating aQuantive's growth.

The new APS team will be responsible for building Microsoft's monetization engine to serve advertisers and publishers. This involves building and marketing all ad platforms--including Atlas, DRIVEpm, MSNDR and Microsoft AdCenter, as well as in-game and mobile ads, and the agency arm Avenue A|Razorfish. A dedicated ad sales team will sell the ad platform and network.

In-game ad specialist Massive Inc. and mobile ad firm ScreenTonic will continue to report to Cory Van Arsdale as part of the new Emerging Media Group within APS. This new group, meanwhile, will report to Karl Siebrecht, president of Atlas.

"Today we take a significant step forward in our ability to capture share of the $40 billion online ad opportunity and the larger $600-billion ad market, which is rapidly shifting to the world of online and IP-served platforms, including TV and gaming," Johnson said. "The addition of aQuantive's technologies and people to the Microsoft portfolio is a core, strategic investment and step forward in our plans to become one of the top two online advertising platforms in the industry." (Yes, Google would be the other.)

Microsoft announced several other moves as part of the reorganization.

Former Ask.com CEO Steve Berkowitz remains in charge of the Online Services Group, with responsibility for Microsoft's "audience" business and end-user service--including the MSN.com portal, Windows Live services and Live Search. Microsoft Digital Ad Sales will continue to sell branded ads within Berkowitz's group.

Satya Nadella heads up the Search & Advertising Platform Group, with a focus on building new search technologies and designing the ad platform. AdECN is reporting into Alex Gounares, corporate vice president for AdCenter and Commerce, who falls under Nadella's jurisdiction.

Former chief advertising strategist Yusuf Mehdi will take on a new role as senior vice president, strategic partnerships, where he will focus on overseeing international M&A and partnerships; emerging strategic accounts; and forging relationships with early-stage startups and venture capital firms.

The majority of the aQuantive team will continue to work from aQuantive's downtown Seattle headquarters. The APS organization will comprise about 3,000 people in its entirety, according to Microsoft spokesperson Whitney Burk.

Clark Kokich, who was promoted last month to CEO of Avenue A|Razorfish, will report to McAndrews.

In response to questions about how the agency intends to ensure neutrality, Burk issued this statement:

"Avenue A|Razorfish will not give any preference to products and services from Microsoft and MSN. It will remain neutral, focused on representing clients' interests exclusively ... The agency has a lot of experience managing this type of conflict [e.g. DRIVEpm]. We know it can be done successfully.

"Customers should look at this as an expansion of the resources which can be brought to bear for their business," he added. "If you look at a trend toward greater scale, automation and centralization toward a platform approach to marketing then we're doing the right thing with an end-to-end marketing solution."

While the Microsoft/aQuantive deal cleared the Federal Trade Commission with no trouble, Google is waiting for regulatory approval of its $3.1 billion acquisition of DoubleClick. After its unsuccessful bid in that deal, Microsoft made sure it wouldn't miss out again--and stunned the industry when it came back a month later with its $6 billion aQuantive deal.