9 ms·

Microsoft Writing Off Nearly All of the $6.3 Billion it Paid For aQuantive

65 points by iProject 14y ago

rudiger 14y ago
Interestingly, aQuantive (formerly Avenue A Media) was founded by Nick Hanauer, one of the people profiled in GQ's recent article[1] on income inequality. He was also one of the first investors in Jeff Bezos and Amazon. [1] - http://news.ycombinator.com/item?id=4181382 http://news.ycombinator.com/item?id=4181382
modarts 14y ago
What truly amazes me is the fact that Ballmer is allowed to keep his job despite one colossal blunder after another.
- xfax 14y ago
  This is why. http://ycharts.com/companies/MSFT/revenues#series=type:company,id:MSFT,calc:revenues&zoom=&startDate=1/1/2000&endDate=7/2/2012&format=real&recessions=false http://ycharts.com/companies/MSFT/revenues#series=type:compa...
  - Argorak 14y ago
    So, he doubled revenue over the last 10 years. They were already high to begin with, but lets see... http://ycharts.com/companies/MSFT/revenues#series=type:company,id:MSFT,calc:revenues,,id:GOOG,type:company,calc:revenues,,id:IBM,type:company,calc:revenues,,id:AAPL,type:company,calc:revenues&zoom=&startDate=1/1/2000&endDate=7/2/2012&format=real&recessions=false http://ycharts.com/companies/MSFT/revenues#series=type:compa... Even more impressive: http://ycharts.com/companies/MSFT/revenues#series=type:company,id:MSFT,calc:revenues,,id:GOOG,type:company,calc:revenues,,id:IBM,type:company,calc:revenues,,id:AAPL,type:company,calc:revenues&zoom=&startDate=1/1/2000&endDate=7/2/2012&format=indexed&recessions=false http://ycharts.com/companies/MSFT/revenues#series=type:compa... So, basically, Microsoft let its two main rivals close in at a tremendous pace. If I had Microsoft stock, I'd be rather disappointed.
    - ThomPete 14y ago
      If that is your metric to judge by, then imagine how disappointed google investors are.
      - laconian 14y ago
        ??? Using that metric, MSFT: +115% since 2004. GOOG revenues: +3,320%
        ThomPete 14y ago
        Please remember the context of this discussion. They point is that Googles revenue comes form one source and they haven't been able to find another just yet as users are moving to mobile. The growth you see is based on a revenue model made a long time ago not on their current performances which are to say the least as embarrassing as anything MS have done over the years. This should be concerning investors in google more than anything. Cause what do they do when most people are on mobile?
        rieter 14y ago
        Google owns mobile advertisement, as well as mobile search. They are in an excellent position for the future.
        ThomPete 14y ago
        Really? Why aren't they making any money with it now then?
        Useful_Idiot 14y ago
        Because the entire industry is a shell game? ~Fundamentals, people, fundamentals. [aka: if you really think that a producer of gadgets is worth more than most countries' GDP, then you're a fucking idiot. Apple et al is a shell game. ~$100 billion for toys. Not how humanity got to the moon]
- ThomPete 14y ago
  Ballmer like most other CEO's up there is playing a completely different game than the one startups play. Microsoft is so far doing just fine with Ballmer.
Jabbles 14y ago
Now do it for Skype.
- redslazer 14y ago
  Ok I'll bite. Skype isn't and won't be a bad investment. It is installed on most peoples computing devices(computer,mobile,tablet), it really doesn't have any good competitors(maybe google voice), it's used heavily in business world for conferencing, virtual numbers and internal comms, it has a nice technology stack which a few companies were eyeing (fb,google). Really it's amuch better investment then spending a billion on a revenue less image sharing site or a corporate social network provider.
  - tomflack 14y ago
    I don't think that Google Voice is any kind of competitor to Skype because of its incredibly limited global availability.
mathattack 14y ago
Interesting. On the surface this seems like a colossal failure. It could also be an accounting trick too. Write the whole thing off now, and people view it as a non-recurring charge. Then when the unit does something/anything to be profitable, it looks like positive earnings rather than a less-bad loss.
- xfax 14y ago
  Yup. It also has the nice effect of inflating the P/E ratio for Microsoft, at least temporarily.
heifetz 14y ago
now when is zynga going to writedown 180mm for OMGPOP.
- tomasien 14y ago
  "Draw Something" is the #55 paid app on the app store STILL. So clearly it's bringing in and has brought in a ton of revenue since the ac (acquisition was in March). Sure not $180MM but it was also an acqui-hire. I think this could have ended up being a great deal for them, despite the negativity. It's not all about one game.
  - shock-value 14y ago
    #55 paid app is not at all impressive given how much they paid for it. For that price Draw Something would have had to stick around the top ten, probably the top five, for quite awhile to make it worthwhile.
calbear81 14y ago
I was part of aQuantive on the Avenue A | Razorfish side and was there for about 2 years leading up to the MSFT acquisition and was also part of another MSFT acquisition (Farecast) so I want to provide some context/opinion on where the business was at it when it was purchased. - The Atlas ad serving platform and related ad exchange platform was one of the top ad systems alongside DART, Valueclick, and others. There was also a steady stream of new leads to Atlas as the agency side acquired new clients. I think the opportunity that was missed was to tie the MSN search business with the banner/rich media ad serving business and create a single platform to reach and remarket based on search intent. A lot of this is done today but this deal was 5 years ago and would have been more groundbreaking. - The agency side of the business wasn't interesting to Microsoft but at that time, Avenue A | Razorfish was the top digital agency in the US with clients from Expedia to Nike to Best Buy. The team at AA|RF had a direct line to the CMOs and worked in most cases as an extension of the marketing teams for these Fortune 500 companies and MS could have leveraged this team as a focus group and to enroll these clients to test innovative ways to market across a publishing network like MSN (still a top portal property). I don't think this was done and again another opportunity missed. Overall, I just felt that there was the potential for aQuantive to help Microsoft close the ad revenue/platform gap with Google and they missed the boat.
- Useful_Idiot 14y ago
  Just for an interesting comparison: Top 100 mining companies in the world: You'll note that even BHP only hits ~$200bil. http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=95737&sn=Detail http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=95... These are companies that fundamentally provide the materials for our societies. Shall we change into energy? ExxonMobil is top, at roughly ~ $300bil http://www.platts.com/Top250Home http://www.platts.com/Top250Home This is a company that powers the modern world. ~ $6 bil for this, $8 bil for Skype, $100 bil for FB is nothing more than Peter-Pan land. aQuant was MS attempting to get Google to move on some issues, and an attempt to monetise chewing the cud. Skype was MS attempting to control P-2-P interfacing - which will probably succeed (and wasn't ever designed to be monetised) FaceBook was attempting to give the proles the same inherent networking architecture that the elites always enjoyed, and the $100bil is a pay-off for reshaping the world Hint: mining & energy deal in reality. Tech stocks deal in 'societal value' [where said value is not value to the consumer, it is value to the code controllers; "if you're not paying for it, you're the product"] and are largely to do with the cost of control. $6 bil in this case means nothing, because MS made billions from nothing. "It's worth a punt". Translation: if you spend $100 bil on liquidity per day, $6 bil is a joke. Remember: Gates has spent $18 billion on "African circumcision to prevent AIDS" already, and the US government spends that in a month on foreign military adventures (both aggressive and passive). ~ It was worth a punt. Google turned out to be aggressively competitive, however (and let's not mention the top three AI specialists who committed suicide in the year Google launched their algos... ok?) Be seeing you.
paulsutter 14y ago
Microsoft bought aQuantive as a knee-jerk reaction to Google's acquisition of Doubleclick. It was comical at the time because - aQuantive's Atlas was a distant number 2 to Doubleclick's DART in terms of ad server market share - aQuantive had no plans to create an ad exchange, nor did their market share make that a credible possibility, and - Microsoft somehow paid twice as much for aQuantive as Google paid for Doubleclick. All told it was a bewildering acquisition. Either Microsoft didn't understand why Google bought Doubleclick, or Google corpdev did a masterful behind the scenes headfake with regards to the value of aQuantive. Yahoo at least understood what the DCLK acquisition was about and bought Right Media. Of course, an open ad exchange is basically at odds with Yahoo's premium inventory direct sales strategy, so it has been difficult for Yahoo to really make it successful. In the end the whole episode was a giant win for Google, and an embarassment for MSFT and YHOO.
- earl 14y ago
  But, had msft executed, there definitely is room for competitors for both dfp and dfa. Many pubs seem to want something, anything besides dfp. Plus the rise of ssps is (maybe?) a reaction to the pub adservers not innovating. For god's sake, openx (written in php!) is being used by pubs. also, hi (earl from qc)
  - dos1 14y ago
    Could you maybe explain some of those acronyms you used?
    - vellum 14y ago
      DFP: Dart for Publishers http://www.google.com/doubleclick/publishers/dart.html http://www.google.com/doubleclick/publishers/dart.html DFA: Doubleclick for Advertisers http://www.google.com/doubleclick/advertisers/dfa.html http://www.google.com/doubleclick/advertisers/dfa.html SSP: Supply Side Platform http://www.adopsinsider.com/ad-exchanges/supply-side-platforms/ http://www.adopsinsider.com/ad-exchanges/supply-side-platfor... Open X: Open source tool for managing ads on your website http://en.wikipedia.org/wiki/OpenX_(software) http://en.wikipedia.org/wiki/OpenX_(software)
veyron 14y ago
Beat you: http://news.ycombinator.com/item?id=4190965 http://news.ycombinator.com/item?id=4190965
SoftwareMaven 14y ago
Accounting question: Is this write off writing off the goodwill that was created by the merger?
- mathattack 14y ago
  Goodwill is the premium paid above the book value. It occurs because most corporate purchases occur above the value the acquired company has on the books. An example: My company has a book (accounting) value if $10 million. I sell it to you for $30 million. $20 million of that becomes an asset on your books of "Goodwill" - a catch-all for the brand value above and beyond my tangible assets. If at some point you don't think you can generate earnings to justify the premium, you write it down. This is what Microsoft did. For a longer explanation: http://en.wikipedia.org/wiki/Goodwill_(accounting) http://en.wikipedia.org/wiki/Goodwill_(accounting)

65 points by iProject 14y ago

Interestingly, aQuantive (formerly Avenue A Media) was founded by Nick Hanauer, one of the people profiled in GQ's recent article[1] on income inequality. He was also one of the first investors in Jeff Bezos and Amazon. [1] - http://news.ycombinator.com/item?id=4181382 http://news.ycombinator.com/item?id=4181382

modarts 14y ago

What truly amazes me is the fact that Ballmer is allowed to keep his job despite one colossal blunder after another.

xfax 14y ago
This is why. http://ycharts.com/companies/MSFT/revenues#series=type:company,id:MSFT,calc:revenues&zoom=&startDate=1/1/2000&endDate=7/2/2012&format=real&recessions=false http://ycharts.com/companies/MSFT/revenues#series=type:compa...
- Argorak 14y ago
  So, he doubled revenue over the last 10 years. They were already high to begin with, but lets see... http://ycharts.com/companies/MSFT/revenues#series=type:company,id:MSFT,calc:revenues,,id:GOOG,type:company,calc:revenues,,id:IBM,type:company,calc:revenues,,id:AAPL,type:company,calc:revenues&zoom=&startDate=1/1/2000&endDate=7/2/2012&format=real&recessions=false http://ycharts.com/companies/MSFT/revenues#series=type:compa... Even more impressive: http://ycharts.com/companies/MSFT/revenues#series=type:company,id:MSFT,calc:revenues,,id:GOOG,type:company,calc:revenues,,id:IBM,type:company,calc:revenues,,id:AAPL,type:company,calc:revenues&zoom=&startDate=1/1/2000&endDate=7/2/2012&format=indexed&recessions=false http://ycharts.com/companies/MSFT/revenues#series=type:compa... So, basically, Microsoft let its two main rivals close in at a tremendous pace. If I had Microsoft stock, I'd be rather disappointed.
  - ThomPete 14y ago
    If that is your metric to judge by, then imagine how disappointed google investors are.
    - laconian 14y ago
      ??? Using that metric, MSFT: +115% since 2004. GOOG revenues: +3,320%
      - ThomPete 14y ago
        Please remember the context of this discussion. They point is that Googles revenue comes form one source and they haven't been able to find another just yet as users are moving to mobile. The growth you see is based on a revenue model made a long time ago not on their current performances which are to say the least as embarrassing as anything MS have done over the years. This should be concerning investors in google more than anything. Cause what do they do when most people are on mobile?
        rieter 14y ago
        Google owns mobile advertisement, as well as mobile search. They are in an excellent position for the future.
        ThomPete 14y ago
        Really? Why aren't they making any money with it now then?
        Useful_Idiot 14y ago
        Because the entire industry is a shell game? ~Fundamentals, people, fundamentals. [aka: if you really think that a producer of gadgets is worth more than most countries' GDP, then you're a fucking idiot. Apple et al is a shell game. ~$100 billion for toys. Not how humanity got to the moon]
ThomPete 14y ago
Ballmer like most other CEO's up there is playing a completely different game than the one startups play. Microsoft is so far doing just fine with Ballmer.

Jabbles 14y ago

Now do it for Skype.

redslazer 14y ago
Ok I'll bite. Skype isn't and won't be a bad investment. It is installed on most peoples computing devices(computer,mobile,tablet), it really doesn't have any good competitors(maybe google voice), it's used heavily in business world for conferencing, virtual numbers and internal comms, it has a nice technology stack which a few companies were eyeing (fb,google). Really it's amuch better investment then spending a billion on a revenue less image sharing site or a corporate social network provider.
- tomflack 14y ago
  I don't think that Google Voice is any kind of competitor to Skype because of its incredibly limited global availability.

mathattack 14y ago

Interesting. On the surface this seems like a colossal failure. It could also be an accounting trick too. Write the whole thing off now, and people view it as a non-recurring charge. Then when the unit does something/anything to be profitable, it looks like positive earnings rather than a less-bad loss.

xfax 14y ago
Yup. It also has the nice effect of inflating the P/E ratio for Microsoft, at least temporarily.

heifetz 14y ago

now when is zynga going to writedown 180mm for OMGPOP.

tomasien 14y ago
"Draw Something" is the #55 paid app on the app store STILL. So clearly it's bringing in and has brought in a ton of revenue since the ac (acquisition was in March). Sure not $180MM but it was also an acqui-hire. I think this could have ended up being a great deal for them, despite the negativity. It's not all about one game.
- shock-value 14y ago
  #55 paid app is not at all impressive given how much they paid for it. For that price Draw Something would have had to stick around the top ten, probably the top five, for quite awhile to make it worthwhile.

calbear81 14y ago

I was part of aQuantive on the Avenue A | Razorfish side and was there for about 2 years leading up to the MSFT acquisition and was also part of another MSFT acquisition (Farecast) so I want to provide some context/opinion on where the business was at it when it was purchased. - The Atlas ad serving platform and related ad exchange platform was one of the top ad systems alongside DART, Valueclick, and others. There was also a steady stream of new leads to Atlas as the agency side acquired new clients. I think the opportunity that was missed was to tie the MSN search business with the banner/rich media ad serving business and create a single platform to reach and remarket based on search intent. A lot of this is done today but this deal was 5 years ago and would have been more groundbreaking. - The agency side of the business wasn't interesting to Microsoft but at that time, Avenue A | Razorfish was the top digital agency in the US with clients from Expedia to Nike to Best Buy. The team at AA|RF had a direct line to the CMOs and worked in most cases as an extension of the marketing teams for these Fortune 500 companies and MS could have leveraged this team as a focus group and to enroll these clients to test innovative ways to market across a publishing network like MSN (still a top portal property). I don't think this was done and again another opportunity missed. Overall, I just felt that there was the potential for aQuantive to help Microsoft close the ad revenue/platform gap with Google and they missed the boat.

Useful_Idiot 14y ago
Just for an interesting comparison: Top 100 mining companies in the world: You'll note that even BHP only hits ~$200bil. http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=95737&sn=Detail http://www.mineweb.com/mineweb/view/mineweb/en/page67?oid=95... These are companies that fundamentally provide the materials for our societies. Shall we change into energy? ExxonMobil is top, at roughly ~ $300bil http://www.platts.com/Top250Home http://www.platts.com/Top250Home This is a company that powers the modern world. ~ $6 bil for this, $8 bil for Skype, $100 bil for FB is nothing more than Peter-Pan land. aQuant was MS attempting to get Google to move on some issues, and an attempt to monetise chewing the cud. Skype was MS attempting to control P-2-P interfacing - which will probably succeed (and wasn't ever designed to be monetised) FaceBook was attempting to give the proles the same inherent networking architecture that the elites always enjoyed, and the $100bil is a pay-off for reshaping the world Hint: mining & energy deal in reality. Tech stocks deal in 'societal value' [where said value is not value to the consumer, it is value to the code controllers; "if you're not paying for it, you're the product"] and are largely to do with the cost of control. $6 bil in this case means nothing, because MS made billions from nothing. "It's worth a punt". Translation: if you spend $100 bil on liquidity per day, $6 bil is a joke. Remember: Gates has spent $18 billion on "African circumcision to prevent AIDS" already, and the US government spends that in a month on foreign military adventures (both aggressive and passive). ~ It was worth a punt. Google turned out to be aggressively competitive, however (and let's not mention the top three AI specialists who committed suicide in the year Google launched their algos... ok?) Be seeing you.

paulsutter 14y ago

Microsoft bought aQuantive as a knee-jerk reaction to Google's acquisition of Doubleclick. It was comical at the time because - aQuantive's Atlas was a distant number 2 to Doubleclick's DART in terms of ad server market share - aQuantive had no plans to create an ad exchange, nor did their market share make that a credible possibility, and - Microsoft somehow paid twice as much for aQuantive as Google paid for Doubleclick. All told it was a bewildering acquisition. Either Microsoft didn't understand why Google bought Doubleclick, or Google corpdev did a masterful behind the scenes headfake with regards to the value of aQuantive. Yahoo at least understood what the DCLK acquisition was about and bought Right Media. Of course, an open ad exchange is basically at odds with Yahoo's premium inventory direct sales strategy, so it has been difficult for Yahoo to really make it successful. In the end the whole episode was a giant win for Google, and an embarassment for MSFT and YHOO.

earl 14y ago
But, had msft executed, there definitely is room for competitors for both dfp and dfa. Many pubs seem to want something, anything besides dfp. Plus the rise of ssps is (maybe?) a reaction to the pub adservers not innovating. For god's sake, openx (written in php!) is being used by pubs. also, hi (earl from qc)
- dos1 14y ago
  Could you maybe explain some of those acronyms you used?
  - vellum 14y ago
    DFP: Dart for Publishers http://www.google.com/doubleclick/publishers/dart.html http://www.google.com/doubleclick/publishers/dart.html DFA: Doubleclick for Advertisers http://www.google.com/doubleclick/advertisers/dfa.html http://www.google.com/doubleclick/advertisers/dfa.html SSP: Supply Side Platform http://www.adopsinsider.com/ad-exchanges/supply-side-platforms/ http://www.adopsinsider.com/ad-exchanges/supply-side-platfor... Open X: Open source tool for managing ads on your website http://en.wikipedia.org/wiki/OpenX_(software) http://en.wikipedia.org/wiki/OpenX_(software)

veyron 14y ago

Beat you: http://news.ycombinator.com/item?id=4190965 http://news.ycombinator.com/item?id=4190965

SoftwareMaven 14y ago

Accounting question: Is this write off writing off the goodwill that was created by the merger?

mathattack 14y ago
Goodwill is the premium paid above the book value. It occurs because most corporate purchases occur above the value the acquired company has on the books. An example: My company has a book (accounting) value if $10 million. I sell it to you for $30 million. $20 million of that becomes an asset on your books of "Goodwill" - a catch-all for the brand value above and beyond my tangible assets. If at some point you don't think you can generate earnings to justify the premium, you write it down. This is what Microsoft did. For a longer explanation: http://en.wikipedia.org/wiki/Goodwill_(accounting) http://en.wikipedia.org/wiki/Goodwill_(accounting)