Microsoft’s Next Move: A Roll-Up of Online Advertising Space?

Microsoft (MSFT) has finally got its hands on an ad network. With its aQuantive (AQNT) acquisition, however, Microsoft has got something else: a portfolio of great interactive ad agencies, including Avenue A/ Razorfish.

An interesting, offbeat, but smart move for Microsoft could be to proactively roll-up a large chunk of the online advertising space, which will force their competitors, Google (GOOG) and Yahoo (YHOO), to sit up.

Let’s look at the players.

Here’s a list of the Top 50 Interactive Agencies of 2006. Omnicom (OMC) and WPP (WPPGY) group own a number of them. Omnicom owns Rapp Collins, Organic, Tribal DDB, Agency.com, and Atmosphere BBDO. WPP owns Wunderman, Oglivy Interactive, G2, and VML. Publicis owns Digitas, Modem Media, Arc, and Moxie. A few others are owned by Interpublic, Aegis Group, Havas, etc. Over 50% of the top 50, however, are still independent.

Sapient (SAPE) is publicly traded, and AKQA, private, recently changed hands from one private equity firm, Francisco Partners, to another, General Atlantic. Between the two, they have a number of great accounts, and if you add to that the 25 other independent players, Microsoft could easily string together a very interesting portfolio of agencies that would give them GREAT leverage with top accounts. [I wrote an earlier piece suggesting Yahoo acquire AKQA.]

If Microsoft follows this strategy, then Google and Yahoo would have an interesting challenge: instead of a top competitor, Microsoft then becomes a top client. Could be an ironical twist of fate!