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August 26, 2008

Deal Rumors: Can WPP Sell Open AdStream and Keep 24/7 Real Media?

Shortly after Microsoft bought aQuantive it quarantined the ad company's agency unit, Avenue A/Razorfish, in its own division with its own CEO. There were two ways to interpret that move: A) Microsoft wanted to keep the unit -- and its substantial profits -- while diminishing the appearance of conflict of interest, or B) Microsoft wanted to sell it and was removing the barriers to such a sale.

A report from AdAge appears to lend credence to the latter theory. According to the story, Microsoft has been in talks with WPP about a possible transaction that would unload Avenue A/Razorfish onto the agency holding company. Rather than a direct sale, unnamed sources tell AdAge the companies are entertaining a swap -- AA/Razorfish for 24/7 Real Media's Open AdStream technology. Such an arrangement would conceal the fact that both companies overpaid for their holdings, the thinking goes.

The partnership might make some additional sense since the companies have a very cozy relationship (Sir Martin Sorrell has spoken at numerous Microsoft events.)

But the logic doesn't quite hold when you look at the deal's technology underpinnings. For one thing, 24/7 Real Media's ad management system is a good deal more limited than what Microsoft already possesses with its Atlas unit. And while it's true that Open Adstream is a publisher side technology and Atlas is historically an advertiser facing one, Atlas has since built out its publisher offerings. Why would it want a redundant system? For the access to publishers? Eh, maybe.

Furthermore, what would be left of 24/7 Real Media after the amputation of Open AdStream? The main strength of this company, which WPP bought just a year ago, is its technology. Dumping the flagship product would be an explicit acknowledgement that the purchase was a blunder. To get AA/Razorfish in exchange for it would be an epic lemons-to-lemonade coup, but I still don't get what's in it for Microsoft.

Posted by Zachary Rodgers at August 26, 2008 9:54 AM

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