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5/18/2007
  Microsoft Buys Aquantive. Top of Bubble.

OK, yes, things are frothy and bubbly in the online ad business.

But 14X revenue for an ad agency? Agencies aren't exactly known for pristine revenue reporting either...

There's a ton of reporting on Microsoft paying $6B for what is essentially an ad agency.

I'm shocked that no one is pointing out that AQNT has profit margins of about 12%. Microsoft other businesses average around 28%. Microsoft may be saying that Aquantive is an "ad network", but it's really a service business. Ad agencies are tremendously cyclical, hiring when times are good, and firing when times are bad. Times are good right now. So that 12% profit margin IS THE BEST margin they are gonna do.

Microsoft probably hopes that Ave.A/Razorfish clients will now be directing a lot of spend towards MSN and Office Live. Meanwhile, Aquantive's big technology piece, Atlas, doesn't even work with MSN adcenter at this point

If I was an Aquantive client, I'd be shopping for a new agency right now...

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