Microsoft (MSFT) made its biggest acquisition ever last Friday when it announced it was planning to purchase online ad firm aQuantive (AQNT) for $6 billion.

Still, several analysts ranging from Wall Street to Silicon Valley have said that the aQuantive deal will not be enough for Microsoft and its MSN unit, which has been stuck in third place in search for a while, to become a formidable challenger to online search leader Google (GOOG). In order to become a more significant player in online advertising, these critics argue, Microsoft has to buy Yahoo! (YHOO), the world’s second largest search company and leader in the so-called display advertising market.   

But Microsoft’s chief advertising strategist, Yusuf Mehdi, speaking at Goldman Sachs’ eighth annual global Internet conference in Las Vegas Wednesday,  strongly dismissed talk of a Yahoo acquisition. Goldman analyst Anthony Noto asked Mehdi if Microsoft is looking to do more big online deals and specifically asked about Yahoo. Mehdi, however, said that Microsoft has “all the pieces we need to move forward.”

He added that while Microsoft will continue to work closely with Yahoo - the two have made their instant messaging networks compatible, for example - Microsoft was not looking to pursue other big mergers. Mehdi also pointed out that Microsoft has already made some smaller deals in the past few years, including the purchase of mobile search tech company MotionBridge and speech recognition software firm Tellme Networks, to bulk up its online presence.

Many analysts have noted that it would make sense for Microsoft to buy Yahoo because Google has such a wide market share lead in search over Yahoo and MSN.

But Mehdi stressed that there is more to online advertising than search. He also said several times that the market for display advertising, which includes banners, videos and other graphical ads, is set to “explode” and that thanks to the assets Microsoft will be inheriting through aQuantive, including the company’s ad placement service Atlas and ad network DrivePM, Microsoft is now in a good position to be a leader in online advertising.

“We are super excited about aQuantive. This really is a game changer for us in terms of what happens with advertising, as the display market explodes,” Mehdi said.

In fact, display is already exploding. According to figures released Wednesday by the Interactive Advertising Bureau and PricewaterhouseCoopers, spending on display and rich media ads grew 39 percent in 2006 from 2005 to $4.9 billion. Keyword search ads, while still accounting for a larger portion of the total ad market, grew at a slightly slower pace. Search spending rose 32 percent to $6.8 billion last year. 

Investors may still be skeptical about whether aQuantive will catapult Microsoft into a true leadership role in the online ad market. But for those that have been holding out hope that Microsoft will scoop up Yahoo in order to take on Google, it’s looking less and less likely that such a deal will ever take place.  

Now that online ad firms aQuantive (AQNT) and 24/7 Real Media (TFSM) are getting scooped up by Microsoft (MSFT) and WPP Group (WPPGY) respectively, Wall Street appears to be betting heavily that ValueClick (VCLK) will be the next company in this suddenly hot market to get taken over.

Shares of ValueClick have zoomed nearly 25 percent higher since Microsoft announced its staggering $6 billion takeover of aQuantive on Friday. But there’s another lesser known public online ad company that is also benefiting from the latest round of dot-com merger mania.

Marchex (MCHX), a company that has made a name for itself by buying Web sites with generic domain names that it then turns into targeted sites focusing on local advertisers, has seen its stock shoot up more than 12 percent since Friday.

I met with Marchex chairman and CEO Russell Horowitz on Tuesday afternoon. And while he said that, as a public company, he’s of course open to a deal, he’s not actively shopping the firm.

In fact, it appears that one reason the stock is doing so well this week is a new partnership Marchex just announced with News Corp’s (NWS) Fox Latin American Channels subsidiary to launch Spanish language Web sites that will be powered with Fox content. Read the rest of this entry »

Congratulations, Microsoft (MSFT) . You’ve finally joined the world of online advertising.

The company’s money-losing MSN online division has been stuck in third place in Internet search for some time. And it was starting to look like it was going to remain an also-ran for the foreseeable future.

Microsoft lost out to Google (GOOG) in the bidding war for DoubleClick. Madison Avenue ad agency (WPPGY) wound up scooping up 24/7 Real Media (TFSM), another company that Microsoft was said to be pursuing. And those merger talks with Yahoo (YHOO) don’t appear to be going anywhere.

But fortunately for Mister Softee, all it had to do was venture out in its own backyard to find a company that instantly catapults it into a leadership position in the online ad business. Microsoft’s $6 billion offer for Seattle-based aQuantive (AQNT) is a brilliant move for the company.

Read the rest of this entry »

Like the portly kid who’s chosen last for dodgeball in gym class, online ad network ValueClick (VCLK) must be feeling pretty left out.

Now that Microsoft (MSFT) is offering to pay $6 billion for ValueClick rival aQuantive (AQNT), a stunning 85 percent premium, ValueClick is the last of the major publicly traded online marketing companies that hasn’t been scooped up by a bigger fish in the Internet advertising pond. 24/7 Real Media (TFSM) agreed to be taken over by ad agency WPP Group (WPPGY) on Thursday. 

But investors appear to be betting that ValueClick might be the next online ad firm to get taken over. The stock was up more than 10 percent in pre-market trading Friday. And shares are already up 18 percent year-to-date.

Still, it’s getting tougher to imagine who might be interested in buying ValueClick since Microsoft’s rivals have already made significant deals in the past month to bulk up in the online ad network arena.

Google (GOOG) started off this merger frenzy in early April when it announced it was buying privately held DoubleClick for $3.1 billion. And Yahoo! (YHOO) followed suit later that month with a deal to purchase the remaining 80 percent in Right Media that it didn’t already own, for $680 million. Read the rest of this entry »