Microsoft sheds 2,000-employee ad agency in $530 million deal

Summary:The rumors of the past few weeks were true: Microsoft has sold Razorfish -- the digital ad agency it purchased when it bought its parent company aQuantive in 2007 -- to Publicis Groupe for $530 million. For those keeping track of employee-headcount totals at home, that means Microsoft is shedding 2,000 or so Razorfish employees as part of the sale.

The rumors of the past few weeks were true: Microsoft has sold Razorfish -- the digital ad agency it purchased when it bought its parent company aQuantive in 2007 -- to Publicis Groupe for $530 million.

For those keeping track of employee-headcount totals at home, that means Microsoft is shedding 2,000 or so Razorfish employees as part of the sale. Given that the Redmondians are poised to add 400+ Yahoos to the Microsoft employee roster if and when the Microsoft-Yahoo search partnership passes government approval, Microsoft's Online Systems business may end up losing a lot more employees in fiscal 2010 than it looked like a week ago. (And that's a good thing, if you are a Microsoft shareholder, since Wall Street is continuing to push Microsoft to trim away at its headcount.)

Among the terms of the Razorfish acquisition, which the pair is expecting to close in the fourth calendar quarter of 2009, Publicis Groupe clients will be allowed "to purchase display and search advertising from Microsoft over the five-year term of the (strategic partnership) agreement on favorable terms, in exchange for certain minimum guaranteed aggregate purchase levels." Razorfish also will continue to be a "preferred provider" of online ads and marketing for Microsoft itself; Microsoft has committed to spend some unnamed minimum sum for those services during the same five-year period.

Microsoft is keeping the rest of aQuantive, a vendor of online advertising platforms and tools, which it bought for $6 billion. aQuantive bought Razorfish in 2004 for $160 million.

In other search-related news, was I the only one who found a note in Yahoo's latest 10-Q (filed August 7) somewhat ironic and interesting?

In the risk factors section, Yahoo management mentioned the possibility of "new technologies (that) could block our advertisements or our search marketing listings" as something worthy of note. One such technology cited by the company: "proprietary document formats, such as Microsoft Word."

From the 10-Q:

"Proprietary document formats may limit the effectiveness of our search technology by preventing our technology from accessing the content of documents in such formats, which could limit the effectiveness of our products and services.

"A large amount of information on the Internet is provided in proprietary document formats such as Microsoft Word. These proprietary document formats may limit the effectiveness of our search technology by preventing our technology from accessing the content of such documents. The providers of the software applications used to create these documents could engineer the document format to prevent or interfere with our ability to access the document contents with our search technology. This would mean that the document contents would not be included in our search results even if the contents were directly relevant to a search. The software providers may also seek to require us to pay them royalties in exchange for giving us the ability to search documents in their format. If a software provider also competes with us, it may give its search technologies, or the technologies of our competitors, a preferential ability to search documents in its proprietary format. Any of these results could harm our brand and our operating results."

Just one more example of the joys of co-opetition... and possibly something the industry's newest BFFs (CEOs Steve Ballmer and Carol Bartz) might have to work out as their partnership moves forward.

Topics: Browser, Banking, Microsoft

About

Mary Jo Foley has covered the tech industry for 30 years for a variety of publications, including ZDNet, eWeek and Baseline. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008). She also is the cohost of the "Windows Weekly" podcast on the TWiT network. Got a tip? Se... Full Bio

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