In the struggle for advantage in the digital advertising boom, companies like Google, Yahoo, Microsoft and AOL are rapidly acquiring once-obscure firms, sometimes for eye-popping prices.
  The payoff, they hope, will be in the relationships and technology that can deliver the right ad to the right person at the right time across a myriad of online sites. The struggle reached new heights when Microsoft recently agreed to buy the online advertising company aQuantive for about $6 billion. It is Microsoft’s largest acquisition, and a sign of its struggle to build an Internet ad business on its own.

Opportunities
As advertising dollars move online, the big Internet companies see a chance to capture an ever-larger portion of the ad business, and they are seeking to expand their existing roles to seize that opportunity.
Until recently, for instance, Google was largely focused on selling small text ads that appear alongside its search results and on other Web sites. Microsoft and Yahoo have sought a piece of that business and sold ads on their own Web portals, which attract hundreds of millions of users each month.
Now, the large Internet companies all want to become intermediaries between advertisers and the millions of Web sites that have fragmented the online audience. And they are hoping to help deliver ads to online video games, cell phones and Internet television services.
“This is about the opportunity,” said Kevin Johnson, President of Microsoft’s platforms and services division. “We believe that there billions of dollars in economic value to be generated in this industry, and we are committed to get a bigger share.”     

Threats
Analysts say that strengthening its online advertising business is particularly critical for Microsoft, not only because the company has lagged behind competitors like Google and Yahoo in this arena, but also because a major technological shift risks eroding the company’s core software business. Google, which leads the online advertising industry, is among those trying to make inroads into Microsoft’s traditional software business  by offering word processing, spreadsheets for free.
Microsoft has “A strategic need to get into advertising in a big way and to protect the castle against the Google onslaught,” said Todd Dagres, Founder and General Partner of Spark Capital, a venture capital firm in Boston.
So far, Microsoft’s online advertising efforts have been a mixed bag. Seeking to compete more effectively with Google and Yahoo, Microsoft made a major investment in building a search engine and a technology system to deliver ads on it. Despite that effort, Microsoft’s share of the online search audience has declined steadily.
Google has more than 500,000 advertisers and Yahoo about 300,000, while Microsoft has only a small fraction of that.

Microsoft’s ad biz
Now aQuantive, which is based in Seattle, will bring many advertisers to Microsoft — and more. The company has three business units, including Atlas, which like DoubleClick sells tools to advertisers and Web publishers that select and deliver the ads appearing on Web pages when users click it.
Additionally, aQuantive’s DRIVEpm unit brings to Microsoft an advertising network that buys ad space from online publishers and sells it to advertisers. All these would give Microsoft a greater role in brokering and selling ads outside of its own Web portal, MSN.
Microsoft said the bidding for aQuantive was competitive, but would not say which other companies were interested in acquiring it. But having been outbid by Google for DoubleClick, Microsoft may have believed it could not afford to let this deal get away.
The pursuit of online advertising businesses has not gone unnoticed by venture capitalists, who are financing a new generation of ad-centric startup companies.
Investors in 2006 put $372 million into companies in Internet marketing services, according to National Venture Capital Association, an industry trade group. That was the highest annual figure since 2000.
International Herald Tribune