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Microsoft’s Next Move: A Roll-Up?

Posted on Monday, May 21st 2007

Microsoft has finally got its hands on an Ad Network. With its aQuantive acquisition, however, Microsoft has got something else: a portfolio of great interactive ad agencies, including Avenue A/ Razorfish.

An interesting, offbeat, but smart move for Microsoft could be to proactively roll-up a large chunk of the online advertising space, which will force their competitors, Google and Yahoo, to sit up.

Let’s look at the players.

Here’s a list of the Top 50 Interactive Agencies of 2006. Omnicom and WPP group own a number of them. Omnicom owns Rapp Collins, Organic, Tribal DDB, Agency.com, and Atmosphere BBDO. WPP owns Wunderman, Oglivy Interactive, G2, and VML. Publicis owns Digitas, Modem Media, Arc, and Moxie. A few others are owned by Interpublic, Aegis Group, Havas, etc. Over 50% of the top 50, however, are still independent.

Sapient (Nasdaq : SAPE) is publicy traded, and AKQA, private, recently changed hands from one private equity firm, Francisco Partners, to another, General Atlantic. Between the two, they have a number of great accounts, and if you add to that the 25 other independent players, Microsoft could easily string together a very interesting portfolio of agencies that would give them GREAT leverage with top accounts. [I wrote an earlier piece, suggesting Yahoo acquires AKQA.]

If Microsoft follows this strategy, then Google and Yahoo would have an interesting challenge: instead of a top competitor, Microsoft then becomes a top client. Could be an ironical twist of fate!

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Srmana,

While this is an interesting thought…the last thing agencies need it tl let the fox in the hen house. I’m not sure if there’s anything to stop this, but I would assume that having the search engines owning the largest ad agencies would have a chilling effect on the online ad and search marketing space from the perspective of competition between agencies.

-giovanni

giovanni gallucci Monday, May 21, 2007 at 10:26 AM PT

Giovanni,

Competition between Agencies exist even while being owned by Omnicom or WPP. Why do you think it would be that much different if Microsoft owned them, or Yahoo, for that matter, besides them having to standardize on the search engine / ad network platform of the owner?

Ad Agencies differentiate on the basis of creativity, primarily, is it not?

Sramana

Sramana Mitra Monday, May 21, 2007 at 10:36 AM PT

[…] has been getting lots of attention, evidenced by Google’s Doubleclick acquisition, Microsoft’s aQuantive acquisition, and Yahoo’s RightMedia acquisition. My earlier post discusses additional potential roll-ups […]

Sramana Mitra on Strategy » Blog Archive » Online Video Ads : Acquisition Targets? Friday, June 1, 2007 at 6:39 AM PT

Sramana,

Great blog! First time reader… Love the coverage on ad networks… they seem to be getting a lot of press and coverage.

The verical ad game and vertical search seems to be lighting up…do u have a list of key players or startups??

email if so!

THANKS

Ron Wednesday, August 22, 2007 at 10:38 PM PT

Hello Ron,

Welcome!

Yes, the startups to watch are Adify, Glam media, Federated Media, Travel Ad Network, etc.

I have written a lot on the topic, I will let you go through some of the writings to catch up on the topic.

See the WSJ post from today.

Sramana

Sramana Mitra Wednesday, August 22, 2007 at 10:46 PM PT