Peter Kafka

Recent Posts by Peter Kafka

Microsoft’s Addition by Subtraction: Goodbye Razorfish, Hello Bing Customers

saleGive this to Steve Ballmer: After getting roundly hammered in the past few years for either missing out on deals (see: AOL/Google) or paying too much for the ones he did land (see: Facebook at $15 billion), he seems to be on a roll.

Last week, Microsoft was roundly praised for the way it structured its Yahoo deal. And today, the company seems to have struck a smart pact with Publicis, which will pay $530 million for Redmond’s Razorfish digital ad agency, which Ballmer never wanted anyway. And the French ad giant will agree to buy a certain amount of search and display inventory from Microsoft over the next five years.

The devil is in the details and we won’t know many of those until regulators sign off on the pact. And even then, we may not get the answer to two big questions: How much will Publicis actually be required to spend on Bing? And what are the penalties if it doesn’t fulfill the minimum?

But at first blush, it looks as though Microsoft (MSFT) managed to get out of a business it never wanted to be in in the first place–it acquired Razorfish as part of a $6 billion deal for aQuantive in 2007, and what it was interested in then was aQuantive’s ad-serving technology. And it may be able to force some dollars through its newly augmented Bing search engine.

That doesn’t guarantee that Web searchers will actually use Bing/Yahoo (YHOO), of course. Current estimates put the combined engines’ reach at 28 percent, and Google (GOOG) has just about everything else. One way to bump that up could be to dangle a big wad of cash–perhaps with the money Microsoft just made by dumping Razorfish–in front of News Corp. (NWS) and Time Warner’s (TWX) AOL, both of which have search deals with Google that expire in the next year or so.


Latest Video

View all videos »

Search »

I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik