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Virtualization in Media: Microsoft Latest to Expand Media Mogul Aspirations

Reported $6 Billion Deal Lets Redmond Keep up with the Joneses--and Google and Yahoo

The report that Microsoft is buying local digital marketing shop Aquantive for a million--check that, six BILLION dollars--shows that if we're not in a new bubble, we're in something that sure looks and feels like the real thing. Redmond seems bent on regaining consumer computing supremacy as it competes with Yahoo and Google for the lion's share of the 21st century media marketing business.

Gather 'round children, and listen to the story of the dot-com bubble of the late 90s and how a lot of people who should have known better--present company included--started thinking that we had entered the 21st century and a New Economy a few years before the calendar told us that the old ways had passed.

To wit, Microsoft's new toy, conveniently located in the shadow of Mt. Rainier in Seattle, is itself a conglomeration of a few companies, the most noted of which is Razorfish, one of the icons of the late 90s. Razorfish started in New York, added several other offices, and was brash and successful in guiding new dot-commers and even some staid old-timers into the world of online marketing.

We all know that the party ended quickly and hideously, sort of like what some of my friends have said that walking out of a bar at 6am and having the sun hit your eyes feels like. Who knows what Razorfish was theoretically worth in 1999? A bil? More? What we do know is that it was worth $8.2 million when it was acquired by sober Utah-based company SBI in 2002.

The newly minted SBI.Razorfish was in turn an Aquantive acquisition in 2004, at a price of $160 million. Things appeared to be in recovery. Now, Microsoft has stormed in and will pay a reported $6 billion in cash to keep up with Yahoo and Google in the digital marketing space. This in the wake of last month's Googleguy of DoubleClick (another original dot-com stalwart) for $3.1 billion, and Yahoo's Right Media Exchange buyout that valued RME at $850 million.

Estimates of the growth in web-based marketing this year vary, and it's most likely that any sort of prediction will be inaccurate. This seems like a new bubble, albeit one without the online dog food of the old days, but rather a fundamental shift in marketing of technology and everything else to a consumer-driven web. It's not Web 2.0, it's the original web with broadband connections. When the dot-com meltdown started in 2000, the reality was that the majority of consumers were still using dial-up services, as the telcos were literally incapable of fulfilling their marketing-driven promises of delivering high-performance connections to the home.

Those days are over. It's a broadband world, with near-ubiquitous wireless networks and multiple computing devices that allow people to get into 21st century cyberspace when and where they want to. The new battle for consumer computing is among Microsoft, Yahoo, and Google. Obvious, of course...but the subtle transformation going on is that the media business is being virtualized. Concepts and execution are in cyberspace, the printing plants have nothing to do with this, and the agencies are owned by the technology providers who enable the agencies and their customers.

Remember, kids, there was a time when it seemed like Redmond was going to have a tough time knocking off WordPerfect and Lotus 1-2-3. Well, it did. At least three generations of competitors in the evolving consumer market have come and gone since that time. With its most recent acquisition, Microsoft has clearly awakened to the challenge.

More Stories By Roger Strukhoff

Roger Strukhoff earned a BA with honors from Knox College, a Certificate in Technical Communications from UC-Berkeley, and an MBA from CSU-East Bay. His work recently won a "Stevie" American Business Award as best publication in its category. His volunteer work in international affairs merited a Letter of Commendation from the Commandant of the U.S. Coast Guard. He splits most of his time between Silicon Valley and Southeast Asia, but can also be found at www.twitter.com/strukhoff

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Virtualization News Desk 05/18/07 02:43:21 PM EDT

The report that Microsoft is buying local digital marketing shop Aquantive for six BILLION dollars shows that if we're not in a new bubble, we're in something that sure looks and feels like the real thing. Redmond seems bent on regaining consumer computing supremacy as it competes with Yahoo and Google for the lion's share of the 21st century media marketing business.