Ad giant Publicis Groupe this morning confirmed an agreement to buy Microsoft's Razorfish online advertising agency for $530 million, along with a five-year strategic alliance under which Publicis will buy display and search advertising from the Redmond company at "certain minimum guaranteed aggregate purchase levels."
Razorfish was part of Microsoft's $6 billion deal for Seattle digital marketing company aQuantive in 2007. The agency, formerly known as Avenue A/Razorfish, was seen as an odd fit inside Microsoft in part because it works on campaigns that run across a variety of sites, including Google, Yahoo and other competitors to Microsoft's online properties. The clues that Razorfish wouldn't be with Microsoft for the long haul included the fact that its employees didn't get the standard Microsoft benefits package.
[Update, 8:40 a.m.: There are "no plans to displace any Razorfish workers in the Seattle region or elsewhere as a result of this agreement," said Microsoft spokesman Lou Gellos in an email message this morning, responding to our question on that topic.]
The cash-and-stock agreement with Publicis follows a bidding war that included ad companies WPP PLC and Omnicom Group, according to the Wall Street Journal, citing people with knowledge of the bidding. Dentsu, Japan's largest advertising company, bid more than than Publicis did, the Journal reported.
That suggests that details of the strategic alliance may have tipped the balance in favor of Publicis, bringing the promise of guaranteed ad revenue. Microsoft is hungry for online advertising dollars and traction in the search market, as evidenced by its 18-month pursuit of Yahoo for their recently announced online advertising and search partnership.
"The agreement helps Publicis Groupe media clients by allowing their agencies to purchase display and search advertising from Microsoft over the five-year term of the agreement on favorable terms, in exchange for certain minimum guaranteed aggregate purchase levels," the companies said in a news release. "The agreement also provides that Razorfish will continue to be a preferred provider to Microsoft for digital strategy, creative and experiential marketing services, and contains a commitment by Microsoft to spend a minimum amount for those services each year during the term of the agreement."
The Razorfish management team will remain intact, according to Publicis, and the agency will operate under its own name as part of VivaKi, a Publicis umbrella for Digitas, Starcom MediaVest Group, Denuo, and ZenithOptimedia.
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