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Software king Microsoft said on Thursday it will acquire online marketing outsourcer LinkExchange to beef up the MSN network's advertising reach and small business offerings.
Financial terms of the deal were not disclosed, but The Wall Street Journal reported Microsoft paid about US$250 million in stock.
"This is a pretty big deal," said Marc Johnson, analyst at Jupiter Communications. "It's a massive distribution channel to get the Microsoft elixir into the veins of the Web."
Microsoft (MSFT) said it wants to target small businesses with LinkExchange's online marketing tools. LinkExchange offers a service that barters ads and banner space with smaller sites. It reaches about 400,000 sites and about 21 million consumers through its advertising network.
Microsoft will immediately incorporate LinkExchange member sites into MSN's search results and the MSN directory, the company said. LinkExchange's flagship product, BannerExchange, will eventually be incorporated into MSN, so that its ads will also appear across all MSN sites.
"This acquisition adds a number of services we haven't had before," said Marty Taucher, director of network communications for MSN. "It gives us much stronger offerings for small- and medium-sized businesses. It also gives us access to hundreds of thousands of sites in the LinkExchange network."
He said MSN's audience reach on the Internet, in combination with the LinkExchange acquisition, has not been calculated, but "will certainly exceed 50 percent."
Taucher said the deal gives ads on MSN more ad impressions. Microsoft could sell advertising space spanning all of the MSN sites, which include Carpoint, Expedia, and MoneyCentral, plus all of the LinkExchange participants.
Analysts said Microsoft could use its broader reach to market other wares. "It's a potential distribution network for [products like] Hotmail, or for IE," said Johnson.
LinkExchange also offers other products that make it easier to build a site and maintain it. Its tools can check for broken links, monitor a site's speed in loading, set up e-commerce capabilities, and count visitors.
Jill Frankle, an analyst at International Data Corp., compared the purchase to Yahoo's acquisitions of online marketer Yoyodyne and Viaweb. "Instead of developing [technologies and services] in-house, they are looking out there for best of breed players to acquire," she said.
Microsoft stock was trading on the most actives list, up $1.62 at $107.12 in early afternoon trading.
