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...

Labels: microsoft

¶ 5/18/2007