Yesterday Microsoft announced the write off of $6.2bn of the $6.3bn it paid for interactive ad company aQuantive in 2007. The aQuantive acquisition came hot on the heals of Google’s $3.1bn acquisition of Doubleclick and was clear evidence of Microsoft’s ambitions to be a serious player in online advertising. After the deal Ballmer said that advertising would become 25% of his company’s business within a few years.
Unfortunately this prediction has not come to pass. In the quarter to March 2012 Microsoft’s Online Services Division (OSD) saw revenues of $707m which was about 4% of total revenues, and it lost $479m. Microsoft has downplayed expectations for future growth in OSD which includes Bing, MSN and adCenter. The FT quotes analysts suggesting they should sell the division to Facebook.
To my knowledge the last aggressive move that Microsoft made in Adtech was participating in a $50m funding round in Appnexus back in 2010, and it looks very much like their ambitions in this sector are fading.
For Adtech startups looking for an exit strategy this is bad news. AOL and Yahoo have both pretty much left the market and Google is now the only large scale serial acquirer left. There are a bunch of mid-sized players, and Facebook and Apple are increasingly important forces, but none of these are predictable enough to build a strategy around. I think that all of this will result in profit becoming an increasingly important metric for adtech businesses looking to exit for more than a couple of hundred million dollars.