Did Microsoft go lose its head over aQuantive?
I've been trying to find a way to illustrate just how screwy Microsoft's $6 billion bid for aQuantive is, and here it is: For $6 billion in cash, Microsoft could have hired, in a single day, 60,000 engineers and salespeople …
Context & Ripple Effects
Two days after Microsoft confirmed its $6 billion all-cash offer for digital marketer aQuantive at $66.50 per share, GigaOM is pushing back on the price: the same $6 billion, spent on salaries, could hire 60,000 engineers and salespeople in a day. The argument lands because Microsoft has stated its goal plainly — building an Internet-wide advertising platform serving advertisers, publishers and agencies.
First-order effects
- aQuantive holders walk away with a full-price all-cash exit, while Microsoft absorbs the cost of acquiring, rather than building, the ad-serving capability behind its stated platform ambitions.
- Microsoft's own engineers and product planners now compete for capital against a marketing-services purchase, exactly the trade-off GigaOM's 60,000-hire comparison is designed to highlight.
Second-order effects
- Advertisers, publishers and agencies gain a heavily capitalized new platform vendor whose roadmap was set by acquisition, raising the bar for any rival pitching them a competing ad stack.
- If the build-versus-buy critique spreads, boards evaluating ad-tech targets face pressure to justify premiums against the internal alternative of direct hiring.
Third-order effects
- Whether $6 billion buys durable platform capability or just expensive services revenue is the open question this bid poses for every software giant chasing an advertising-led business model; the answer will shape how aggressively incumbents pay up for ad assets.
The trend: Large software platforms are paying cash premiums for advertising infrastructure to close a gap with rivals, turning ad-tech M&A into a test of whether reach can be purchased.