This morning Microsoft Corp. (NASDAQ: MSFT) announced that it's buying aQuantive Inc. (NASDAQ: AQNT) for $6 billion, an 85% premium to its market price. Why is this deal happening? To compete with Google Inc. (NASDAQ: GOOG).
Last year my firm conducted a client-sponsored study of the email marketing industry. The top performing company in that research was AQNT. After interviewing the senior executives there, it became clear that email marketing offers a compelling benefit for a corporate advertiser -- the ability to measure return on advertising.
The reason Microsoft wants this ability is to help it compete with GOOG for online advertising dollars. That's because AQNT's technology enables companies to track what happens to their spam. Specifically, AQNT's Avenue A service targets emails depending on observed online behavior.
It uses email to associate a unique and anonymous cookie with each user. Specifically, Avenue A places an action tag in the email that is sent to customers who have already registered with the client's web site. When a customer opens this HTML email, the firm's customer identification number is appended to an Avenue A cookie.
This enhanced cookie is stored in the Avenue A ad serving database. During future visits to the web, this user's behavior is tracked and the user is served specific messages that vary based on behavior. In addition, Avenue A's eCRM system incorporates online behavioral data – such as visits to a landing page or abandonment of a shopping cart – to personalize email and Web media messages.
But Microsoft's move can also be thought of as a way to keep up with its competitors. Yesterday, WPP Group PLC (NASDAQ: WPPGY) bought online advertising company 24/7 Real Media Inc. (NASDAQ: TFSM) for $649 million. Last month, GOOG agreed to buy online advertising company DoubleClick Inc. for $3.1 billion, and Yahoo Inc. (NASDAQ: YHOO) took out the privately held online ad exchange Right Media Inc. for $680 million.
Thought you could get in on the next deal? Too late. ValueClick (NASDAQ: VCLK) popped almost 10% to $30.85 in early trading. Meanwhile, be prepared for Microsoft-brand spam.
Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned in this post.
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