Viacom Shuns DoubleClick, Embraces Microsoft
The last days of Viacom’s advertising partnership with DoubleClick were long ago foretold. With Viacom still feuding with Google over YouTube and copyrights, and with Google’s purchase of DoubleClick likely nearing the end of regulatory review, it was just a matter of time. Wednesday the hammer dropped and Viacom pledged its allegiance to Microsoft.
In a five year deal worth at least $500m in exchanged value, Microsoft and the media giant behind MTV Networks, Nickelodeon and Paramount pictures reached a complex advertising and content distribution deal.
Under the pact, Microsoft will license Viacom content (non-exclusively) for use on both Microsoft web properties and for the Xbox 360.
Atlas, the Microsoft advertising division acquired in the purchase of aQuantive, will become the ad server for Viacom’s U.S. web properties. Microsoft will also have the exclusive right to sell unused display ad inventory on Viacom’s sites. Some portion of the advertising served on Viacom properties, in turn, along with broadcast advertisements, will be bought by Microsoft.
Search advertising will not be included. For search, Viacom signed a multi-year deal with Yahoo last April.
The deal will reach far beyond a simple web advertising relationship. Among other influences, it has implications in gaming. Microsoft’s Xbox platform is currently running a second place behind the Wii in the console wars and MTV Networks committed to spending $500m to expand its gaming footprint in August. Resulting from the new pact, the two companies will likely develop closer publishing ties. There’s no word whether the deal might also give Viacom an inroad into Microsoft’s in-game advertising business but that’s probable.
Viacom CEO Philippe Dauman suggested choosing to work with Microsoft was a natural fit for them. He said Microsoft has “the will and the resources to commit whatever is necessary to win, and to provide resources to its partners.”
Microsoft pledged just such a commitment publicly in July. Shortly after their $6b purchase of ad firm aQuantive cleared antitrust review, CEO Steve Ballmer told financial analysts “we are hell-bent and determined to allocate the talent, the resources, the money, the innovation to absolutely become a powerhouse in the ad business.”
In October, Ballmer reiterated the importance of advertising in Microsoft’s future. He went so far as to predict 25% of Microsoft’s business would come from advertising in just a few years.
The online ad market is worth as much as $40b today and widely expected to double by 2010. The larger advertising opportunity, including broadcast and print markets that may migrate to digital platforms, represents a more than $600b opportunity globally.
Microsoft is not sitting idle in their efforts to stake a claim. Aligning with Viacom for five years secures long term ad inventory at a number of high traffic web properties. Of equal note, the deal also locks out Google.
Microsoft scored a similar coup recently by signing up CNBC . They’ve also trumped Google to secure the ad rights on Facebook and social news aggregator, Digg.
Kevin Johnson, the head of Microsoft’s platforms & services division, says about 50 Web publishers have been signed up since Microsoft acquired Atlas.
As part of the joint marketing elements of the deal, both companies will jointly market and promote content and award shows hosted on Viacom’s MTV Networks and BET.
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