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Why Are Microsoft Selling Its Online Advertising Agency Razorfish?

Microsoft is reportedly looking to sell its online advertising agency Razorfish just two years after acquiring it as part of a $6bn deal for parent company aQuantive Inc. According to a report in the Financial Times, Microsoft has brought in the investment bank Morgan Stanley to seek out a potential buyer for the agency, which according to predictions should sell for somewhere between $600 million and $700 million in the current economic climate. It's hardly a surprise move as there has been speculation over whether Razorfish really fits into Microsoft's new strategy to trim back expenses and concentrate purely on its core business during the recession.

When Microsoft made the decision to purchase aQuantive in 2007 its main purpose was to create a stronger online advertisng network for the brand and enable the company to compete more effectively with Google. The benefits of owning Avenue A/Razorfish, as the agency was then called, were secondary to other aspects of what aQuantive could offer Microsoft as much as it would allow the company to significantly broaden its online ad network and give it a much better chance of competing with the biggest online contender, Google. The ownership of an advertising agency, however, may have meant a conflict of interest for Microsoft as Razorfish would be competing directly with the company’s own advertising efforts for marketing Microsoft products on the web.

Razorfish is a high profile agency with clients including Nike, Mercedes-Benz USA, Levi-Strauss & Co and Audi. The amount of money involved might not seem much to Microsoft, but ridding themselves of the conflict of interest could enable Microsoft to put more emphasis on marketing their own products across different media. The FT report names French marketing company Publicis Groupe as the most likely potential buyer for Razorfish, following rumours that Publicis and Microsoft are planning to join forces for a TV ad campaign in the near future.

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