Last week Microsoft acquired Greenfield Online, the parent company of a European price comparison, shopping and consumer review site called Ciao. The deal went through for $486 million (â‚¬333 million) and Microsoft will use Ciao to expand Windows Live Search in Europe.
Do not be seduced by grand slam deals alone; clever stuff around the edges can be smarter.
Microsoft aims to have 25% of its total revenues generated by digital advertising in a few years' time. There are two main factors that drive success in the online advertising business: the strength of your web presence and how effectively you monetise that web presence.
On the first point, Microsoft still has a long way to go in building its web presence to rival Google as the near-default webpage for consumers. It also clearly lags behind Google and Yahoo! when it comes to making money from online advertising. It has been slow to gain critical mass in an area where this is crucial to success. Microsoft is trying to change, and acquisition has been the main vehicle.
Microsoft's big acquisitions, like aQuantive (US$6 billion/â‚¬4.11 billion) and Yahoo (US$44.6 billion/â‚¬30.56 billion), tend to get all the attention. But alongside these mega deals it has also made a string of comparatively smaller scale acquisitions that initially seem a bit random and at best opportunistic.
On closer examination, it is these peripheral acquisitions that are usually more interesting and make sense. The idea with the smaller deals is to pick up companies that add value to the core proposition.
Players that fall into this category include analytics company DeepMetrix (acquired in May 2006), French mobile advertising specialist Screen Tonic (May 2007), the AdECN advertising exchange platform company (July 2007), and Multimap, a UK company providing online mapping for Europe, North America and Australia (December 2007). The Ciao acquisition is in the same spirit.
Microsoft will integrate Ciao's technology platform, online community and merchant links into Windows Live Search in a move it hopes will improve the capabilities and appeal of the service. We think it will. Price comparison, user review and shopping sites like Ciao are increasingly popular with consumers and in the current economic climate are likely to become more so.
And of course the more traffic Windows Live Search can generate, the more appealing it will be to advertisers. It will also help Microsoft improve the e-commerce proposition of its MSN portal as pricing and product information will be added into MSN search results for terms in categories such as electronics, travel and cars.
There is no indication of Ciao's actual value in the acquisition price, which also includes Greenfield's online research business. This appears to be the larger part of Greenfield's business that Microsoft is in turn selling off - the price and purchaser have not been revealed. However, stats from Comscore make Ciao look decent: it had 26.5 million unique visitors per month in May 2008 that have generated around 5 million product reviews.
It operates across seven European markets, has links to 2,000+ merchant partners and has 20 product categories such as cars, computers, digital cameras, finance, mobile phones and travel. Put Microsoft's marketing clout and money behind Ciao and in theory it can only get better.