Business

Microsoft Looking to Pawn Razorfish After Short Lived Romance

Just a year after Microsoft purchased online ad agency aQuantive, rumors are circulating that the software giant is trying to offload the company’s digital ad shop — Avenue A|Razorfish. AA|Razorfish was a bit of a freeloader in Microsoft’s bid to grow its share of the online advertising pie last year. Desperate to expand its ad […]

Just a year after Microsoft purchased online ad agency aQuantive, rumors are circulating that the software giant is trying to offload the company’s digital ad shop — Avenue A|Razorfish.

AA|Razorfish was a bit of a freeloader in Microsoft’s bid to grow its share of the online advertising pie last year. Desperate to expand its ad search capabilities after Google nabbed DoubleClick for $3.1 billion in March, Microsoft paid $5.9 billion in May for aQuantive's three businesses: Atlas, DrivePM, and Avenue A.

DoubleClick is the largest online ad-serving company. Microsoft went after aQuantive — the second largest — primarily to acquire Altas’ ad tracking software and the DrivePM ad network. Avenue A accounts for 60% of aQuantive's revenue, but served no purpose in developing Microsoft’s ad platform.

In fact, the partnership is riddled with problems. Microsoft has said that they are taking a very hands off approach to managing the company, but last year Razorfish Senior Vice President Jeff Lanctot____ told Silicon Alley Insider outlined some of the problems inherent to working for Microsoft:

“It's really a conflict of interest. If our clients think for one minute that we are favoring Microsoft over AOL, we would lose that client tomorrow. Likewise if the MSN sales team is thought to be favoring us or providing us with information at the expense of other agencies or advertisers that business would go somewhere else. So, it's really high-risk for really no reward.”

It makes sense that Microsoft would look to offload the agency, but if they sell AA|Razorfish now, there is no chance Microsoft could make up their investment. And selling at a steep discount would essentially admit that they overpaid last year.

However, if Microsoft could make a trade for another venture, they could save face and avoid selling AA|Razorfish at a bargain price. This weekend AdAge

reported that Microsoft may be able to do just that with ad giant WPP:

According to several people in the ad-serving industry, WPP is interested in unloading Open AdStream, the ad-serving business it acquired in its $649 million purchase of 24/7 Real Media — another deal in which the acquirer was criticized for overpaying. Out of the 24/7 deal, WPP got a large search-engine-marketing business with a concentration in China, which served to make group Chief Executive Martin Sorrell Google's biggest customer, as he has noted several times since, as well as to bolster WPP's stake in the fast-growing Asia market. It also got an ad network, which serves as the basis for an automated media-buying system in which it is tapping into ad exchanges.

But having a publisher-side ad-serving tool is seen as less integral within WPP, so it has become a bargaining chip to get something the group would rather have: Avenue A/Razorfish.

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