Is there some relationship between razorfish and stingrays? About the time I started to blog about Microsoft selling digital ad agency Razorfish to Publicis Groupe, a phone call came that a stingray had stung my daughter. So I raced north to Del Mar beach, where the wonderful lifeguards cared for my wounded 15 year-old. We’re back home, and I am, finally, ready to offer my intrusive opinion about Microsoft’s sale.
Is Microsoft CEO Steve Ballmer out of his fraking mind?
I’m sure he sees the sale as a good business deal, and even I confess the terms look awfully good for Microsoft. But Razorfish is an asset Microsoft should want to keep, especially in context of the recent Yahoo search deal (You know, the one where CEO Carol Bartz gave away the keys to the vault where Yahoo stores its most valuable intellectual property assets). Search and keywords shouldn’t be divorced from digital marketing. Sorry, but adCenter isn’t enough.
Razorfish was, at least before 2007, a cool company. Razorfish commanded a strong brand as well as coveted client list—and it’s still a top marketing agency. I don’t see advertising and search as being core to Microsoft’s business, but if the company has to go there Razorfish is valuable asset to hold onto.
Yes, Razorfish fits oddly into the Microsoft product universe, but, from several perspectives, so does aQuantive. Microsoft picked up Razorfish with aQuantive in May 2007 for a whopping $6 billion. In the sale announced today, Microsoft gets back about $530 million in cash and treasury shares for Razorfish. That’s one way to make money from the aQuantive acquisition. Microsoft’s Online Services group is as much a money put before the acquisition as after.
I long have considered Razorfish to be one of the hidden jewels in the acquisition and one that Microsoft could better utilized with more commitment. But about a year ago, I started seeing signs that Razorfish was starting to dull. A great agency wasn’t flourishing under Microsoft ownership. So I wasn’t surprised when Microsoft put the agency up for sale, but I most certainly was disappointed.
The Razorfish Website links to June 2009 Forrester Research report: “Interactive Marketing Agencies—Web Design Capabilities, Q2 2009” by analyst Vidya Drego. The report highly ranks the agency, with caveats:
Razorfish offers a comprehensive set of marketing services that span multiple screens and tend to incorporate social media. The agency remained in the Leaders’ circle on the strength of reference sites that scored well in user experience and exceptionally well in brand experience. Razorfish also distinguished itself by its ability to gather and utilize deep customer insights.
Microsoft touts a three-screen—PC, TV and mobile phone—technology strategy that could have melded well with Razorfish’s strong interactive, including social media sites/services, and multi-screen marketing strengths. Microsoft should have been able to keep Razorfish, but I contend there was the lack of commitment—particularly against the global recession’s backdrop—to invest in the agency and extend it to support Microsoft’s broader search and advertising strategies.
Instead, Microsoft brokered a deal that gives the company two things other than money:
- Access to Publicis Groupe clients
- Continued use of Razorfish services (for a fee, of course) without Microsoft having to manage to digital advertising agency
According to the press release:
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 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.
Microsoft has set Razorfish free, to a place where it will likely grow again. But it should never have had to be. Microsoft has squandered what should have been one of the best assets from the aQuantive acquisition. Sigh.