TO software titan Microsoft Corp's already formidable armoury of business weapons, add one more: media company.
'Microsoft is a software company, and we are also going to be a media company,' Microsoft CEO Steve Ballmer declared in an interview with BizIT last week.
Explained Mr Ballmer: 'You know, we grew up as a desktop software company, we became an enterprise software company, and a consumer electronics software company. Now we're trying to become an advertising software company.
'Does that make us a media company? Well, we're not going to create newspapers like The Business Times, but I think that anybody who sells advertising has to say they have a relationship to the world of media.'
The advertising aspect of media, and online media in particular, has clearly got the Microsoft chief pumped up. Unlike advertising on television, which is clearly intrusive, the online world provides 'advertising opportunities that are not disrupting the core experience', Mr Ballmer says.
Moreover, 'I think the fact that in the online world we can know more about the user, and provide advertising that actually is relevant and interesting to them in a much easier way than we can in the offline world, is very, very valuable'.
Indeed. Industry experts put the annual value of online advertising as high as US$40 billion currently. And that online pie is expanding fast, even as traditional ads struggle to maintain growth.
Hence Microsoft's willingness to cough up US$6 billion, an eye-popping 85 per cent premium over valuation, to acquire online marketing agency aQuantive. The deal, announced on May 18, is Microsoft's biggest ever acquisition.
'We wanted the business,' Mr Ballmer says candidly. 'I think it took that amount to buy the business, and we're happy to have won it.'
The software giant may also have learnt from its setback just a month earlier, when it sought to buy ad-serving software firm DoubleClick. Despite reportedly making an initial bid of US$2 billion, it lost out to arch-rival Google's US$3.1 billion offer.
The memory clearly rankles the Microsoft chief. 'Google never outbid us for DoubleClick,' he says, not once but three times. 'You've got to talk to the owner. I don't know what happened. I just know that nobody bid higher than we did.'
But aQuantive isn't a bad alternative, and in fact has its own advantages, according to industry experts. Based in Seattle, close to Microsoft's Redmond headquarters, the online firm's US$442 million in revenues last year were far higher than DoubleClick's, with strong double-digit growth to boot.
Said Mr Ballmer: 'They're different assets with different strengths. aQuantive has technology and market presence with advertisers, and DoubleClick has more of its presence with publishers.'
Then, combative as ever, he added: 'I'm glad we own aQuantive, and we certainly will compete through aQuantive with some of the stuff going on at DoubleClick.'
