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The Honolulu Advertiser
Posted on: Tuesday, August 14, 2007

Microsoft takes aim at Google

By Jessica Mintz
Associated Press

Hawaii news photo - The Honolulu Advertiser

Brian P. McAndrews, left, CEO of aQuantive, and Microsoft executive Kevin Johnson discuss the $6 billion buyout.

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SEATTLE — In closing a $6 billion buyout of digital marketing company aQuantive yesterday, Microsoft is taking a first step in its quest to leapfrog Yahoo and challenge Google in the online advertising business.

"Our goal is to be No. 1 or No. 2," Kevin Johnson, president of Microsoft Corp.'s platforms and services division, said in an interview last week.

It's an ambitious plan, given that the software maker lags far behind Yahoo Inc. and Google Inc. in search traffic and advertising revenue.

Microsoft has said disruptive changes in the software industry — a shift away from desktop programs and toward applications delivered over the Internet — will touch every one of the company's products, in ways yet to be determined.

With aQuantive Inc., Microsoft believes it has cleared away some worries about how to stay profitable during the shift. Johnson said units in the two companies are being combined and reorganized to provide an advertising platform to support new Web-based services.

A new advertising and publishing solutions organization is being formed, under the plan Johnson and aQuantive Chief Executive Brian McAndrews outlined last week with The Associated Press.

The group, to be led by McAndrews, includes aQuantive's ad-serving technologies and tools for tracking the success of online ad campaigns, and DrivePM, which extends Microsoft's ability to sell Web ads to aQuantive's broad network of top sites.

It will also include Microsoft's tools for selling search and display ads across its own sites, as well as Massive Inc., a company Microsoft bought last year for inserting ads within video games, and ScreenTonic, a mobile advertising company Microsoft acquired in May.

Microsoft's online services group, led by Steve Berkowitz, will continue to focus on expanding the company's audience on sites like MSN and Live Search and finding new advertising partnerships like the one recently announced with the social news site www.Digg.com.

AQuantive's Avenue A/Razorfish, a well-regarded Web design and online advertising agency, will operate "at arm's length," McAndrews said.

That means the agency will make decisions based on marketer's needs, not on its ownership by Microsoft.

Such decisions include whether to use Microsoft's Silverlight technology instead of Adobe Inc.'s Flash, or whether to buy ads on MSN instead of Google.

Microsoft will have to post stellar improvements in traffic, search query share and advertising revenue to soothe investors' concerns.