Home What's Brewing? Razorfish Sale, Microhoo Conditions

Razorfish Sale, Microhoo Conditions

The French advertising group Publicis Groupe SA has agreed to acquire Internet ad agency Razorfish from Microsoft for $530 million in cash and stock.

Razorfish will continue to operate under its own brand name and continue to serve as Microsoft’s “preferred provider” for Internet advertising, the companies announced in a joint statement. The deal includes a strategic alliance agreement in which Publicis Groupe will purchase display and search advertising from Microsoft over a five-year period.

“The purchase of Razorfish is a new step in our strategic plan to be the unquestionable leader in digital communication,” Publicis Groupe Chief Executive Officer Maurice Levy said in the statement. “Once this acquisition is complete, about a quarter of our revenue will come from digital communication and our ability to grow and conquer will be reinforced.”

Publicis Groupe is one of the world’s largest media companies, employing about 44,000 people at advertising networks Leo Burnett and Saatchi & Saatchi, as well as media buyers Starcom MediaVest Group and ZenithOptimedia. This editor helped launch “PI”, the Interactive division of the agency, Publicis Interactive, in 2002.

Microsoft had reportedly been evaluating prospective suitors for Razorfish for several months, with top ad firms WPP, Omnicom Group, and Publicis Groupe all expressing interest in Razorfish. Talks were also held between Microsoft and agencies Interpublic Group and Dentsu.

Originally known as Avenue A/Razorfish, the marketing stategy and creative services group most recently designed the logo for Microsoft’s new search engine Bing, as well as many of the the ads for the launch. The agency has more than 2,000 employees and counts Dell, Disney, and Nike among its clients.

Microsoft acquired Razorfish in 2007 as part of its $6 billion takeover of Aquantive. The deal for Aquantive was Microsoft’s largest ever and highlighted the importance of supporting more-advanced advertising products and technologies across areas including media planning, video on demand, and Internet Protocol television. The acquisition of Razorfish specifically was considered especially important as a way to give Microsoft a new presence in the ad services business and also help promote its rich media and video plug-in Silverlight. [24×7]

Inside Microhoo Search Deal: Performance Plays a Part!
One-time readers of two Seattle area daily newspapers, (circa 2008), were long aware of a court-ordered Joint Operating Agreement that governed the Seattle Times and the late Seattle P-I. So long as the Times did not suffer two consecutive years of losses, the P-I could remain intact. That unholy bond dissolved, as did the P-I, when ad revenue turned south at the start of the economic downturn. You may be surprised to learn that a similar performance requirement exists between the Microsoft and Yahoo search agreement!

Yahoo may terminate its 10-year search ad partnership with Microsoft if the revenue-per-search query rate of Yahoo’s and Microsoft’s combined U.S. queries falls below a certain percentage of Google’s estimated RPS in a 12-month average according to a filing with the Securities and Exchange Commission on Aug. 4.
This provision, which underscores the laser focus Yahoo and Microsoft have on search market leader Google, changes in the second leg of the 10-year term.

Any time after the fifth anniversary of the deal, Yahoo has the right to terminate the search deal if just Yahoo’s U.S. RPS is less than a percentage of Google’s estimated RPS on a 12-month average.

Yahoo may also terminate the deal if Microsoft exits the algorithmic search or paid search businesses. Moreover, if Microsoft decides to sell its algorithmic search or paid search services businesses, Yahoo will have a “right of first refusal and right of last offer to purchase such businesses.”

Both companies can quash the deal if it is not hashed out by July 29, 2010. [24×7]

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