Microsoft/aQuantive Merger: So Far, So Good

Microsoft completed its acquisition of digital ad giant aQuantive for $6 billion a long 11 months ago.

The transaction remains the largest to date in the digital marketing space — a record unlikely to be broken until either AOL or Yahoo is acquired. With the deal’s anniversary approaching, it’s a good time to assess the integration. Many expected a messy one, given aQuantive’s enormous size and the companies’ presumably divergent cultures (After all, aQuantive came with a creative and media services agency). Probably a horror show over there, right?

Not so, according to a number of sources both inside and outside Microsoft. In fact the growing consensus is that aQuantive’s culture and technology have begun to infuse its parent with new digital marketing mojo, and that both parties have managed to preserve advertiser relationships during the transition.

“It’s actually working far better than I thought it would work,” said one Microsoft source, who asked not to be identified.

Specifically, this source said, Microsoft appears to be accelerating the development of targeting capabilities with aQuantive on board.

“I don’t have to worry about translating to someone [at Microsoft] why this is important,” he said. “I have someone tell me how I should look at targeting. Those guys have been teaching Microsoft a lot of things. Culturally, they’re good people.”

Agencies, site owners, and other partners are also pleased, but for different reasons. A number of agency execs say their primary contacts at aQuantive and Microsoft’s various units — which include DRIVEpm, MSN Network, adECN, Massive Inc. and others — have neither abruptly left, nor been transferred, nor laid off. In fact, some say communication with reps is better than ever, contrary to conventional merger wisdom.

“We see a lot of really good communication from both Microsoft and aQuantive relative to what they’re doing and a lot of inclusion of agencies,” said David Smith, CEO of digital media agency Mediasmith.

Paul Uhlir, VP of business development for Seattle-based agency Dragon Media Online, said he initially feared losing access to people and campaign data as the company began combining its divisions. Those fears turned out to be unfounded.

“When I heard about the merger my first thought is I hope nothing messes up,” he said. “I’ve been through a few bad acquisitions before and you can sense the acrimony and unhappiness. With both sides you don’t sense that. I think they’ve done a great job of keeping the teams in place.”

On the other hand, he said many of the supposed benefits of consolidation have yet to arrive.

“Clients say, maybe we can leverage our ad spend with both and push rates down,” Uhlir said. “That hasn’t happened. We also anticipated the benefits of leveraging data. That, I anticipate, will come but hasn’t happened yet.”

Several factors appear to be aiding the combination of the companies’ operations, according to sources. First, both are based in the Seattle area, which has eased communication between top-level executives.

Another positive factor: the structural changes Microsoft introduced after closing on aQuantive seem to have been well received. Last August it created an Advertiser and Publisher Solutions group and named Brian McAndrews, CEO of aQuantive, to lead it. That group was to have oversight of Atlas, DRIVEpm, MSNDR, Microsoft AdCenter, and aQuantive’s agency arm, Avenue A/Razorfish. Later Steve Berkowitz, head of online services, stepped down as head of the Online Services Group, oversight of which was transferred primarily to McAndrews.

“There are little fiefdoms, yes,” said the Microsoft source. “But overall the right Microsoft people were picked to go ahead and the right aQuantive people stepped up.”

It’s too early to proclaim the integration a complete success. That’s because Microsoft has only just begun to integrate its ad networks — including DRIVEpm, MSNDR, and its sales efforts on behalf of marquee site partners such as Facebook and Digg — in a serious way.

That might appear to put it behind AOL, which has aggressively promoted the fusion of its many ad networks into a single unit, Platform-A. However, according to Mediasmith’s Smith, the Platform-A integration isn’t necessarily further along.

“Just because someone names something differently doesn’t make it more integrated,” he said. “Platform-A is just a name.”

That’s not to say Platform-A is doing a lousy job. “It depends what market you’re in, whether you’re dealing with one sales force or a number of sales forces,” he said.

Is it possible that Microsoft’s ability to bring aQuantive under its roof with such aplomb — so far, anyway — has given it the confidence to pursue Yahoo, a much more sprawling target, so vigorously?

“It does give you confidence,” said the Microsoft source. “We actually pulled this off. We didn’t bury this company.”

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