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.