Microsoft sheds digital ad arm

Microsoft has finally shed the assets of its global interactive agency Razorfish to Publicis Groupe for €373 million.

The sale ends a year long divestiture saga for Microsoft which inherited the advertising agency as part of €4 billion acquisition of Aquantive in 2007.

Razorfish has around 2,000 staff globally, a number which will most likely be radically trimmed once part of the Publicis group.

While a number of global ad agency’s were vying for the asset and Japan’s Dentsu’s offering a reportedly higher bid at around €492 million, Microsoft opted for Publicis due to a clever strategic tie-up with Publicis’ roster of clients, including Coca-Cola and HP which will be buying millions of dollars worth of ads across Microsoft’s Bing and MSN platforms.

Under the transaction Microsoft and Publicis have signed a strategic alliance agreement, in which Publicis clients will buy display and Bing advertising  from Microsoft over the five-year term of the agreement, in sympathetic terms.

The deal also expands the Microsoft-Publicis  deal executed in June to collaborate on TV ads.

Publicis CEO Maurice Levy  said, “we are paying between 1.4 and 1.5 times sales, which in the digital world is reasonable.”

Razorfish has revenues of about €267 million in 2008. Razorfish  will also continue to be a “preferred provider” to Microsoft for digital marketing services with Microsoft committing on a yearly  minimum marketing spend.

Microsoft may now look at selling other non core digital assets such as struggling in-game advertising gaming platform Massive Inc.  

Massive was acquired by Microsoft for €297 million and recently reduced staff by one third due to the pause in the in-gaming ad sector.