Microsoft forms new ad unit
SEATTLE (Reuters) - Microsoft Corp. said on Monday it formed a new business group to work with advertisers and publishers and gain a foothold in an online advertising market expected to grow to $80 billion by 2010.
The creation of the Advertiser and Publisher Solutions group comes on completion of its $6 billion acquisition of Web advertising firm aQuantive Inc., the software maker's largest acquisition ever.
Microsoft named Brian McAndrews, the former chief executive of aQuantive, to head the new advertising group, which will be responsible for building and marketing all of the company's advertising businesses.
McAndrews will report directly to Kevin Johnson, president of Microsoft's platforms and services group. In an interview with Reuters, Johnson would not rule out future acquisitions, but said Microsoft has a complete advertising offering for now.
"My view is that we have assembled all the components we need," said Johnson, who is also responsible for Microsoft's core Windows business.
The world's largest software maker announced its plan to purchase Seattle-based aQuantive in May, a key acquisition in its strategy to an online advertising powerhouse to compete against Google Inc. and Yahoo Inc..
The aQuantive deal is the largest in a recent wave of consolidation within the Internet advertising sector as the Web's largest players try to shore up their market positions in a rapidly growing industry.
"We just have the opportunity to trade gasoline for rocket fuel in terms of how fast we can grow," McAndrews said in an interview.
The deal cleared regulatory hurdles last month, and aQuantive shareholders approved the acquisition on Thursday.
Web search leader Google is waiting for regulatory approval of its proposed $3.1 billion purchase of DoubleClick Inc., which helps advertisers serve and track ads online, in a move to enter the market for graphical display ads.
U.S. antitrust officials are studying the deal after Microsoft and other Google rivals complained it could give Google too much control over online advertising.
SEARCH ON "POSITIVE TRAJECTORY"
Microsoft said the transaction should not have a significant impact on the company's fiscal 2008 earnings projections. The company forecasts online advertising sales to grow by more than 20 percent this year.
Some of the gains could come from improvements in its Web search business.
Johnson said its Web search business remains on a "positive trajectory," building on momentum after Windows Live Search gained market share over competitors in the June quarter.
"Over the next 12 months, we've got a very aggressive engineering plan with multiple releases of search coming forward," Johnson said.
Microsoft has lagged behind Google and Yahoo in Web search, the most lucrative slice of the online advertising market. Google, the market leader with about 50 percent share, has built a multibillion dollar business from search, while Microsoft's online services group has been in the red.
Pay-per-click ads tied to search results has been the main driver of online advertising growth in recent years, but McAndrews sees other forms of Web advertising playing a larger role as new forms of media like online video gain acceptance.
"Search was a key part of the growth in the last several years," said McAndrews. "With more emerging media, we'll continue to see search be very important, but just a part of the mix and a less significant part of the mix over time."
Shares of Microsoft were down 8 cents at $28.63 in afternoon Nasdaq trade.
(Additional reporting by Michele Gershberg in New York, editing by Gerald E. McCormick)
