The battle between the ad giants and the tech giants - Microsoft and Google - is really heating up.
Publicis, one of the world's biggest ad agencies, shelled out $530 million for Microsoft's interactive Razorfish. This means Publicis will generate 25 percent of its revenue from digital ads, helping in its push to compete with the likes of WPP. But perhaps most interesting, it gives Microsoft a new ally in its online ad battle with Google.
The five-year agreement between Publicis and Microsoft gives Microsoft a stake in Publicis and gives the ad company attractive terms for display and search ads from Microsoft, in exchange for minimum guaranteed purchases. It incentivizes Publicis to encourage its clients to give extra consideration, let's say, to Microsoft ads. This builds on an ad deal Publicis and Microsoft made in June, and it is in addition to a deal Publicis has had with Google since January 2008.
Razorfish may be the latest pawn in Microsoft and Google's battle for web ad dollars, but what does this mean for the interactive ad agency and the company that acquired it? I spoke with David Kenny, the manager of Vivaki, Publicis' digital and media division, which will oversee Razorfish. Kenny told me that his team and Microsoft worked on a model to enable their clients to get the best deals in terms of rates, data about the ad's impact, inventory, and technology. He explained that they won't be forcing media deals on their clients, but while they present Microsoft offerings to their clients, they expect them to be particularly appealing.
An alliance with Microsoft certainly provides an advantage - insight, and even input into business of generating and selling ad inventory.
But what does this mean for Publicis' relationship with Google?
Kenny insists that their clients need to work with both of Google and Microsoft, and both Microsoft and Google want to work with them. (Though I would suppose that Microsoft would much prefer they *just* work with Microsoft). Kenny argues that Google and Microsoft are two parallel businesses selling different ad inventory, and if they're buying search ad terms they'll buy the same terms for different platforms.
I think this issue is only going to get more and more complicated. Kenny says that Bing "just gives customers another choice and our money will follow wherever the customers are." But with Bing trying to grab Google marketshare and Google going into Microsoft's arena, it's more than *just* another choice.
It's the start of a long battle and ad relationships with mega agencies like Publicis will be key in driving revenue to both of the giants.
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