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Aug 25, 2008

How Avenue A Sale Will Help WPP – And Microsoft

Avenue A Deal Could Give WPP, Microsoft What They Really Want

But Estimated $800 Million Is a Far Cry From What Microsoft Paid

NEW YORK (AdAge.com) -- Almost six months after the companies started talking, WPP and Microsoft have reopened talks that could have the software company unloading Avenue A/Razorfish. But the question is whether Microsoft could ever get anyone to buy the digital ad agency for the price at which it needs to sell it. 

What Microsoft paid for the agency and what any holding company would shell out are vastly different figures -- although WPP holds an edge over other holding companies because it has assets Microsoft might be interested in, namely the ad-serving technology bit of 24/7 Real Media. ..

How Avenue A Sale Will Help WPP – And Microsoft

August 25th 2008
by Kathleen  |
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microsoft_small.jpgADOTAS – WPP Group and Microsoft have opened talks (again) that would have Microsoft selling off Avenue A/Razorfish, which it acquired, along with parent company aQuantive for $5.9 billion about a year ago, according to a report in AdAge. (Atlas and DrivePM were also part of the aQuantive acquisition).

But there’s a hitch: the software giant doesn’t want to unload Avenue A for its real market value – about $800 million – because it doesn’t come close to the roughly $3.5 billion it shelled out for the shop in the first place, according to the pub. (AdAge’s admits its calculations may be inaccurate, but said that Avenue A did generate about 60% of aQuantive’s revenue and $3.5 billion is 60% of aQuantive’s final purchase price).

Microsoft’s rumored pride-salvaging maneuver: “WPP is interested in unloading Open AdStream, the ad-serving business it acquired in its $649 million purchase of 24/7 Real Media — another deal in which the acquirer was criticized for overpaying,” AdAge reports. “Out of the 24/7 deal, WPP got a large search-engine-marketing business with a concentration in China, which served to make group Chief Executive Martin Sorrell Google’s biggest customer, as he has noted several times since, as well as to bolster WPP’s stake in the fast-growing Asia market. It also got an ad network, which serves as the basis for an automated media-buying system in which it is tapping into ad exchanges.

But having a publisher-side ad-serving tool is seen as less integral within WPP, so it has become a bargaining chip to get something the group would rather have: Avenue A/Razorfish.”

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