Reuters cites Microsoft’s acquisition of aQuantive, announced in May and completed in August, as evidence of how serious they are about online advertising.

Johnson called Microsoft’s plan for web dominance the “10, 20, 30, 40″ plan. If all goes accordingly:

1. 10% of all Internet page views will be MSN.com and Windows Live email
2. 20% of all time online will be spent at Microsoft website
3. 30% of Internet searches will be performed on Microsoft/Live
4. 40% of Internet and digital ad dollars will be paid to Microsoft

Some of these goals are pretty optimistic: while they already have 6% of Internet page views (four percentage points off goal 1), and 17% of time online (three percentage points off goal 2), they only have 10% of Internet searches (twenty percentage points off goal 3) and 6% of digital ad dollars (thirty-four percentage points off goal four).

Johnson’s plan to compete:

“If you look at the landscape of other competitors or other companies in this area, not only do we have the technology, research and development capability to deploy, but (we have) our willingness to invest for the long term,” said Johnson in a question-and-answer session with UBS analyst Heather Bellini. . . .

Johnson said Microsoft has worked to improve the relevance of its Web search results and how it presents that information, but the company has failed to close the gap on Google and Yahoo.

Of course, I don’t really expect much more than buzz words from them, something tells me that Google and Yahoo have a couple of dollars to spend on “technology, [and] research and development” and I think they’re willing “to invest for the long term.” Maybe I’m wrong, though, maybe Google’s plan all along is to get dominate the market, squash the competition and then, after a couple years, fade into obscurity as quickly as possible.

And relevance? Was relevance supposed to be enough to unseat Google and Yahoo?

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Microsoft and the AP hope the new delivery platform will drive deeper audience participation and generate advertising revenue for affiliates.

"Video advertising is growing in popularity, and the ability to attach local ads to local content is something that customers like the AP are seeing as a tremendous competitive advantage for their business," said Karl Siebrecht, president of Atlas.

Local ads will be served via Atlas AdManager, and sold directly via OVN affiliates; national video ad inventory will be served via Microsoft adCenter, sold exclusively through Microsoft’s advertising sales force.

"The competition for eyeballs online in the news business is very tough, and our affiliates are constantly looking for new and innovative ways to more actively engage their users," said Jessica Hawk, director of Online Video for AP.

Hawk also called Microsoft’s local ad-serving technology "a big step forward" in building viewer loyalty while building additional revenue for affiliate sites.

Tacoda was founded in 2001 and uses technology that allows advertisers to serve ads based on consumers’ online behaviors. Using Tacoda’s technology, AOL will extend its targeting capabilities to advertisers and publishers along with extending the reach of its third-party display network Advertisng.com.

"Behavioral targeting is a fast-growing part of the advertising business, as marketers increasingly look to get efficient and measurable results from their advertising dollars. With Tacoda, we can offer advertisers state-of-art targeting tools," said AOL Chairman and CEO Randy Falco.

"Combined with our own network, our Advertising.com third party network, and our other recent acquisitions in the advertising space, AOL now has one of the most robust and sophisticated advertising platforms in the business."

According to eMarketer, the behavioral targeting market is on track to increase to $3.8 billion by 2011, from $350 million in 2006.  There have been a number of companies buying online ad networks, the largest being Microsoft’s purchase of aQuantive for $6 billion and Google’s acquisition of DoubleClick for $3.1 billion.

Financial terms of the deal were not released but estimates put the amount between $200 million and $300 million according to the New York Post. Tacoda will continue to be based in New York.

The chief one is the creation of “the Advertiser and Publisher Solutions (APS) Group.”  According to a press release, “This new business group will be responsible for building Microsoft’s monetization engine to serve the advertiser and publisher community,” and will be in charge of “Atlas, DRIVEpm, MSNDR and Microsoft AdCenter, along with emerging media types such as in-game and mobile ads, and the agency arm Avenue A | Razorfish.”

Also, “The APS group will be run by Brian McAndrews, CEO of aQuantive, who will report directly to Kevin Johnson, president of Microsoft’s Platforms & Services Division.”  That qualifies as a major modification to the chain of command.

Not a lot of other specifics were shared; guess Microsoft isn’t ready to alert Google and Yahoo of its plan to beat them in the online ad industry.  One item of note is that most of aQuantive’s employees will continue to work within their Seattle offices, so Microsoft has achieved a slight physical expansion.

$6 billion would have bought quite a few acres of land, however.  Look for more to come from this deal than an additional address.

Google: All The Other Companies Are Doing It

Even tattletale Microsoft.

Pablo Chavez, policy counsel for Google, gleefully notes that since Google’s April 13 acquisition, Yahoo bought Right Media, AOL bought ADTECH AG and TACODA, WPP Group bought 24/7 Real Media, and Microsoft bought both aQuantive and AdECN Inc.

That’s a lot of advertising companies and a lot of money. Excluding three acquisitions where amounts were not disclosed, that’s at least $10.4 billion in online advertising companies being toss around.

Chavez argues that the number of advertising companies bought recently, as well as "several" startups that have entered the space encouraged by acquisition activity, means that there is no danger of an online advertising monopoly.

He then uses aQuantive CEO Brian McAndrews’ words against Microsoft. "We’re in the first or second inning of a long game here," said McAndrews. "There’s no monopoly on innovation. I don’t think you’re going to see two or three big players and then game over. There will continue to be a broad range of companies."

Of course, in that same MediaPost article Chavez cites, McAndrews said the Google/DoubleClick deal was a "completely different story," though why is not elaborated.

Then again, he sort of has to take Microsoft’s side.

"[W]e think that these acquisitions signal a new phase in online advertising, in which barriers between technology providers and advertising agencies are beginning to fall," echoes Chavez, sticking to his talking points like a good spokesperson.

"These market dynamics will ultimately benefit consumers who will see more relevant and useful ads, and provide advertisers and publishers with more choices. And these are exactly the kind of competitive and innovation-driven market conditions that policy makers should be encouraging in our economy."

Financial terms of the deal were not disclosed but the New York Post is putting the figures between $200 million and $300 million according to its sources.

Tacoda was founded in 2001 and uses technology that allows advertisers to display ads based on users online behavior. With the acquisition, AOL says it will be able to extend its targeting capabilities to advertisers and extend the reach of its third party display network Advertising.com.

"The acquisition of Tacoda will build on our advertising momentum, letting us better serve advertisers by enhancing our ability to precisely target advertisements across an even broader network," said Ron Grant, AOL President and COO.

"We are committed to bringing advertisers and publishers a full range of tools and services, along with the widest reach, and with Tacoda we’re taking another step toward that goal."

According to eMarketer, the behavioral targeting market is on track to increase to $3.8 billion by 2011, from $350 million in 2006.  There have been a number of companies buying online ad networks the largest being Microsoft’s purchase of aQuantive for $6 billion and Google’s acquisition of DoubleClick for $3.1 billion.

"AOL is a perfect match for Tacoda. By combining our targeting capabilities with AOL’s existing set of solutions, we can better serve online advertisers and publishers as the market for behavioral targeting continues to emerge," said Curt Viebranz, CEO of Tacoda.

Both Yahoo and MSFT will tell you that this is just “normal procedure,” but I’d be shocked if both didn’t get a request to appear before the Spanish inquisition very soon.

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The Microsoft Honcho was dressed casual and looking comfortable as Danny Sullivan started his Q & A. On the current position of Microsoft, Satya said Microsoft was passionate and had the need to contribute. So, the biggest question they face currently is how to show that innovation. Also, he said, Microsoft had very little to lose! The focus currently, of Microsoft is to integrate the engineering teams (ad and search) together and bring out the best to keep its 500 million users all around the world.

Whe Danny Sullivan asked about the recent super-expensive purchase of aQuantive, Satya was prompt in justifying the acquisition saying:

“At some level aQuantive has cracked the code on this one. They had a technology business as well as an agency. They were able to keep the agency and maintain its flexibility and separation from their technology business, so clearly anything we would do would just take that leadership that aQuantive has shown and make sure that we retain it and not change. … We will have to make sure that we reinforce what aQuantive has done in order to be able to keep those two businesses separate."

Microsoft is working on having the #1 search interface with the most detailed search results. "We’re in the first phases of search innovation". Finally, on asked why people live.com should be used, Satya said only Live.com has an aggregation of a whole of the latest features.

A cheeky invitee asked Satya whether users would be paid to use live.com to which a laughing Satya said he’ad ask the Microsoft boss.

Famous last words:

Satya doesn’t think he’s in the search game only to win or get their fair share in the verticals. In fact, he and Microsoft are in the game for both.

Being able to really get contextual search around the entire Microsoft network and increase engagement is perhaps job number one.

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Tag:

• Ebay Purchases StumbleUpon for $75 million
• FeedBurner Sold! for $100 million to Google
• Google Buys Panoramio, Photo Mapping Software
• Fox Interactive Media (NWS) Acquires Photobucket and Flektor
• Google buys GreenBorder Technologies for more security in Google Apps
• Microsoft buys aQuantive Inc, for 6 billion US dollars
• CBS buys Last.fm
• AOL Buys Mobile Ad Network
• Microsoft Buys CareerBuilder; Google Interested In SimplyHired
• AOL Buys German Ad Server Adtech
• Yahoo Fully Acquires Right Media (April 30th)
• Facebook Partners with Oodle for Classifieds

Google and Microsoft seem to be positioning themselves strategically in order to keep up with each other in the war for Internet dominance. I expect to see this trend of acquisitions continuing strong into the summer.

Do leave a comment if I have missed any major partnerships or purchases.

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Microsoft will spend $6 billion dollars for aQuantive, which includes Avenue A/Razorfish and a couple of other notable online ad-related businesses. Atlas and DRIVEpm are part of the deal, as noted by Jason Lee Miller earlier.

So the third party ad industry looks like this: DoubleClick goes to Google, reportedly for money equal to a Microsoft offer, for $3.1 billion. Yahoo scoops up what it doesn’t already own of Right Media for $680 million. WPP spends $649 million on 24/7 Real Media to give Martin Sorrell another piece for his marketing empire.

Chump change. Amateurs. When it comes to spending money, Microsoft doesn’t throw a block party. It razes the block, plows up the land, dumps salt on ever square inch, and vaporizes it from orbit.

The $6 billion cash (CASH!) Microsoft will spend to pick up aQuantive for about $66.50 per share blows away the other three deals cited.

There is one point on which Microsoft feels its buy is different than the Google/DoubleClick deal, which Microsoft thinks could violate antitrust regulations. TechCrunch picked up on this exchange between Microsoft and Bear Stearns during a conference call about aQuantive:

Bear Stearns question: does this affect MS

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