aQuantive Acquisition Signals Major Shift In Media/Advertiser Relationships

Early this morning Microsoft announced it will buy online marketing company aQuantive -- the holding parent of interactive agency Avenue A/Razorfish, display and paid search ad mangement platform Atlas and inventory management system DrivePM.  The $6 billion deal cash deal represents an 85% premium to aQuantive's closing price last night and will likely close during the first half of 2008.

I think there are two obvious calls to make based on this deal:

1.   The acquisition certainly builds out Microsoft's access to the entire online advertising supply chain.  Prior to the acquisition Microsoft had the execution channel -- sites where advertisers could buy ads.  Now, they also have the upstream pieces of this chain:  planning, strategy, creative.  WPP is working toward a similar goal with its recent announcement to acquire 24/7 Real Media.  But WPP had the planning, strategy, and creative pieces and bought 24/7 for access to the downstream channel.   

2.  aQuantive also pairs Microsoft more equally against Google.  Of course there was a competitive influence in this purchase as well.  With the deal, Microsoft now has the same ad serving capabilities and access to advertiser and publisher relationships that Google gained with DoubleClick.  And Microsoft also picked up a global professional services agency.

But there seems to be something much more going on with these acquisitions than the benefits we see on the surface.  I think this spate of acquisitions means:

*The definition of what a media company is is changing.  Today, consumers are so bombarded with media, and online loyalty is so hard to secure that it is very difficult for advertisers to select media properties that uniquely capture their user.  So, media companies have to develop different ways to differentiate from each other.  Since they can't really deliver a differentiated audience, they instead need to offer differentiated services:  Easier transaction management, better reporting, strong customer analytics, access to multiple ad formats and properties to streamline the buying process, even media planning and buying services.  I think Google, Yahoo and MSN all have a vision in mind to become "next generation media companies" that secure advertiser and publisher loyalty through these enhanced, integrated services.

*Advertisers ultimately won't go for a one stop shop.  There is definite appeal for advertisers to working with a single party for all their online advertising needs.  And yet, I think the smart advertisers will need more than just an easier, more streamlined way to develop and execute online marketing.  They will want to make sure that the media they buy is actually delivering optimal results.  I expect advertisers will hang onto third party agencies to help them watchdog these new media/service provider conglomerates to ensure their objectivity.

*The shift to online marketing has at last begun.  We in the industry have been talking about the shift away from traditional media into online for the last 10 years.  But the medium took time to establish its credibility.  I think the intensity and price tags of these acquisitions indicates that some very big media and agency firms are staking their bets on online.  They've watched the success of Google with search, and want to be in front of the next huge shift of budget into online advertising.

Comments

re: aQuantive Acquisition Signals Major Shift In Media/Advertis

There’s a little of déjà vu all over again happening. Over the last few weeks major media platforms like Google, Yahoo and MSN (Windows Live) have been gobbling up content generators, in this case the content is online advertising companies. I call these companies media platforms rather than media companies because at the core, they are means to the end (finding meaningful content) rather than an end themselves.To me, this sounds suspiciously similar to the rise of the big ISPs like AOL, CompuServe and MSN just a few years ago. In the case of Microsoft and MSN, I remember they went out and bought a lot of content companies resulting in successes like Slate and failures like Mungo Park (for those who don’t remember, it was an online adventure travel magazine started by Microsoft in the late ‘90s).Today, it’s not about controlling end user content, it’s about controlling online ads. Yes, ads just like we’ve seen on billboards, in subway stations and on TV for generations. Today’s online ads are far better targeted, can be much better tracked and are a lot cheaper than their traditional siblings, but essentially they are still pushed at consumers in much the same way. And so it’s no surprise to me that big companies are flocking towards them, because while they are different, they’re still reassuringly familiar.The real wins in marketing are not going to be around who can deliver the most interruptive messages across new media, they are going to be focused on who can harness the power of the consumers to be the brand stewards of the future. New channels like blogs, wikis, RSS, communities integrated with a true media neutral multi-channel approach will be where the real gains will be. Forrester has been promoting a customer-centric model for some time now as well as an integrated approach as represented by its Agency of the 21st Century. Neither of which appear to me to be centered around advertising, regardless of online or not.So good luck to Google and Microsoft. You will probably make some pretty impressive gains in the online marketing space, but I don’t think you’re going to do anything to improve customer experiences and the real business gains felt as a result of adopting a collaborative approach to marketing.