The Ad Wars: Microsoft Buys aQuantive

There is a deal that happened this week, and the deal is the war: the announcement that Microsoft made on Friday, the agreement to buy aQuantive for $66.50 per share in cash. The deal is the May 18 fact: the house that owns Avenue A/Razorfish and Atlas and DRIVEpm, the prize that Microsoft took after Google took DoubleClick. The deal is the ad wars: the battle for display advertising, the race that began with Google's agreement in April to buy DoubleClick for 3.1 billion dollars. The ad wars is the May 2007 story, and the story is the lesson: the market that is being consolidated, the digital economy that is being divided.

The Ad Wars is the subject of this article: what Microsoft announced on Friday, why aQuantive was the prize, and what the battle for display advertising means.

1. The Announcement

The announcement is the moment, and the moment is Friday: the May 18 news that Microsoft would acquire aQuantive, the offer of $66.50 per share, the payment in all cash, the total of about six billion dollars. The announcement is the record: the largest acquisition in Microsoft's history, the deal that was bigger than any deal before it, the check that dwarfed the company's past purchases. The announcement is the answer: the deal that followed the Google move, the target that was the next big thing, the scale that caught the industry's attention, the confidence that came from Redmond on Friday.

The announcement is also the signal: the Microsoft that usually builds and partners, the company that competes patiently, that grows its own products, now buying its way into the advertising business with a single stroke of the pen. The announcement is the May 2007 meaning: the company that could not get DoubleClick, the company that bought the next big thing, the company that paid a premium of roughly 85 percent over the old price. The announcement is the turning point: the strategy that changed, the check that was written, the war that was joined, the deal that changed the course.

2. The Target

The target is the house, and the house is the stack: the aQuantive that owns Avenue A/Razorfish, the digital agency that plans the campaigns, the Atlas that serves the ads, the DRIVEpm that runs the network, the pieces that fit into one advertising company. The target is the Seattle business: the firm that is based in Seattle, that owns the agencies and the tools, the full service house for the marketers who want to buy, to measure, to optimize online, the one stop shop of the digital age. The target is the asset: the customers, the technology, the inventory, the people who know where the ads go.

The target is also the fit: the aQuantive that complements Microsoft, the agency that brings the creative, the Atlas that brings the plumbing, the network that brings the reach, the combination that makes a complete advertising stack. The target is the May 2007 meaning: the company that Google could have wanted, the company that Microsoft needed, the prize that was available when DoubleClick was not, the house that was ready to be taken. The target is the logic: the agency that brings the campaigns, the serving that brings the delivery, the network that brings the reach, the platform that was ready.

3. The Trigger

The trigger is the Google deal, and the Google deal is the April fact: the agreement that Google announced on April 13 to buy DoubleClick for 3.1 billion dollars, the ad serving company in the display advertising business, the purchase that changed the chessboard overnight. The trigger is the exclusion: the Microsoft that had wanted DoubleClick, the Microsoft that could not get it, the auction that went to Google, the empty seat at the table. The trigger is the response: the search for the next big thing, the list of candidates, the aQuantive that rose to the top of the list.

The trigger is also the pattern: the Yahoo that bought Right Media on April 30, the consolidation that swept the whole industry, the three giants that each took a piece of the advertising stack. The trigger is the May 2007 meaning: the deal that started the race, the deals that followed in its wake, the market that was being divided before the summer even began, the race that would run all year. The trigger is the sequence: the Google move in April, the Yahoo move in April, the Microsoft move in May, the war that escalated week by week.

4. The Ad Wars

The war is the market, and the market is display: the banners and the rich media, the billions of impressions that change hands, the advertisers who want the audience, the publishers who sell the space, the platforms that connect them. The war is the three fronts: the Google that bought DoubleClick, the Microsoft that bought aQuantive, the Yahoo that bought Right Media, the three companies that now own the very tools of the trade. The war is the consolidation: the independent ad companies that are disappearing, the stacks that are being assembled, the race that is being run in public.

The war is also the reason: the display advertising market that is growing, the money that is moving online, the brands that are following the eyeballs, the future that belongs to the platform that serves the most ads. The war is the May 2007 lesson: the internet economy that runs on advertising, the companies that must own the pipes, the deals that are the price of staying in the game, the stakes that grow with every quarter. The war is the reality: the ad wars that began this spring, the battles that are being fought this week and the next.

5. The Price

The price is the number, and the number is the record: the $66.50 per share, the all cash offer, the six billion dollars, the largest acquisition in Microsoft's history, the sum that made the industry look twice. The price is the premium: the roughly 85 percent above the price before the announcement, the markup that shows the hunger, the money that had to be paid to take the prize. The price is the question: the value that analysts will debate for months, the earnings that must justify the cost, the integration that must work, the bet that must pay off.

The price is also the signal: the Microsoft that writes the big check, the company that is serious about advertising, the board that approved the sum, the strategy that is backed by cash. The price is the May 2007 meaning: the deal that Google made look small, the deal that Microsoft had to top, the inflation that comes when two giants want the same market at the same time. The price was the commitment, and the commitment was proof. The price is the June question: the quarter that will come, the numbers that will be watched, the deal that will be judged.

6. The Strategy

The strategy is the platform, and the platform is the plan: the Microsoft that wants to be the advertising platform for the digital age, the adCenter that will compete with AdWords, the inventory of MSN and Windows Live, the ads that will appear across the web. The strategy is the Ballmer push: the software plus services vision, the ads everywhere ambition, the company that sells both the tools and the audience. The strategy is the leverage: the reach of the Microsoft properties, the data of the search engine, the aQuantive stack that will serve the campaigns, the machine that is being assembled.

The strategy is also the fight: the adCenter versus AdWords, the search battle that spills into display, the Microsoft that must win the advertisers, the Google that must be matched. The strategy is the May 2007 meaning: the company that is no longer just software, the company that is becoming a media company, the advertising future that is being claimed this week. The strategy was the vision, and the vision was the war. The strategy is the whole: the search that feeds the ads, the sites that carry them, the tools that measure them, the network that links the pieces.

7. The Stakes

The stakes are the dollars, and the dollars are the future: the advertising budgets that are moving from print and television to the screen, the display market that is growing, the share that waits to be claimed. The stakes are the platform: the company that controls the ad serving, the company that controls the network, the company that controls the data, the company that controls the money. The stakes are the position: the Google that leads search, the Microsoft that must respond, the Yahoo that is caught between. The stakes are the scale: the winner that takes the digital economy.

The stakes are also the users: the consumers who see the ads, the clicks that are measured, the pages that are monetized, the free services that are paid for by the advertising. The stakes are the May 2007 meaning: the deal that is about more than a company, the deal that is about the architecture of the internet, the deal that will define the decade. The stakes were the reason, and the reason was the price. The stakes are the audience: the millions who search, the millions who read, the millions who click, the audience that is the real currency.

8. The Lesson

The lesson is the consolidation, and the consolidation is the pattern: the Google deal in April, the Yahoo deal in April, the Microsoft deal in May, the market divided into three empires. The lesson is the strategy: the companies that cannot build must buy, the platforms that must be complete, the stacks that must be owned, the scale that is the defense. The lesson is the Microsoft example: the company that lost DoubleClick, that regrouped in weeks, that bought the next big thing. The lesson is the timing: the deals that are done in weeks, the decisions that cannot wait.

The lesson is the perspective: the ad wars that will continue, the deals that will follow, the platforms that will be tested, the winners that will be decided by execution. The ad wars is the May 2007 story, and the story is the lesson: the deal that was announced on Friday, the target that was in Seattle, the race that was started by Google, the war that is fought for the web. The acquisition was the move, and the move was the war. The lesson is the moment: the spring of 2007, the deals of the spring, the war that begins.

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