Last week, Microsoft announced that it had acquired Santa Barbara-based AdECN (www.adecn.com), a provider of an online advertising exchange marketplace. We spoke with Bill Urschel, the company's CEO and founder, to get more color on the acquisition, how it happened, and where AdECN will fit into Microsoft. Ben Kuo conducted the interview.
What's the story behind the acquisition and how it happened?
Bill Urschel: Actually, it was very straightforward. We contacted them well over a year ago, and made our pitch to them--not so much for an acquisition, but for them to become part of our exchange. If you don't remember, we're a stock market like exchange for advertising. We were too early for them, several people couldn't get their hands on what we were doing--but it happens they had a fellow there writing a white paper, proposing just what we were doing. We went ahead and got our exchange up and launched--we launched March first--and had 39 ad networks as members. Microsoft came back to us in April, and suggested the deal. I think it was just maturation of our industry, and the point where they needed to do something with the exchange concept. Yahoo acquired Right Media, which is similar but not exactly an exchange; Google acquired DoubleClick, which had announced but not launched an exchange. We're different from the other two players, we're truly neutral, and only work with ad networks--we don't work with advertisers or publishers, and have a flat fee.
How long did it take for the deal to happen--we often hear that working with big companies is difficult?
Bill Urschel: They actually moved very quickly. I would say by the end of April we knew where we were going, and we signed last week. Most of the delay was not them, it was most us dotting our I's and crossing our T's. It was very fast, considering that there were lots of moving parts and attorneys involved, and it was not unpleasant. I've sold companies before -- to public companies -- and this was by far the most exhaustive in terms of due diligence I've gone through. I'd have to say I'm happy with the deal process itself, and I ended the deal respecting them for it.
What part will you play at Microsoft, and will you still be involved?
Bill Urschel: I'm still involved. I'll be with Microsoft for awhile, at least 2 years. I'm looking forward to that. The company is going to remain an independent subsidiary of Microsoft, still south of Santa Barbara here in carpinteria. We'll be adding forty employees posthaste. I will be personally located in Redmond, commuting back here quite a bit. Microsoft now owns a company in beautiful downtown Carpinteria.
What kind of role will AdECN play at Microsoft?
Bill Urschel: In terms of our role, as an exchange we're part of the infrastructure. As I mentioned we have 39 ad networks, who act like stock brokers. Each of these ad networks has dozens, hundreds, or thousands of advertisers and publishers. Microsoft has at least six entities who will become members of the exchange, and they will become members exactly as the others -- with the same membership agreement, paying the same fees, and abiding by the same rules. For Microsoft, we're sticking together their online components, as we do for our other online members.
Was the deal driven by the M&A activity in the online advertising industry?
Bill Urschel: I think the incredible mergers and acquisition speed contributed to this, as everybody is rethinking their partnerships and business models. More important than the M&A activity, I think it helped people crystallize where the industry was, and where it was going. One big indicator is getting someone to define "ad network". Six months ago, they could tell you. After the acquisition of 24/7 by WPP, Aquantive by Microsoft, that ad network role is changing somewhat. It's definitely shifting stuff.
Had you been hearing from other companies before talking to Microsoft?
Bill Urschel: We got offers from others, but this one by far made the most sense. Our other offers were from ad networks and agencies, and if they acquired us it would have tainted the neutrality of the exchange too much. Even with Microsoft, we have to be careful, however we think Microsoft is diverse enough to stay neutral. The other candidates we had couldn't have possibly been neutral. If they bought us, it would have tainted the exchange, and wouldn't have worked.
What was the response of the ad networks to the acquisition?
Bill Urschel: Our first 39 calls were to our existing members. Frankly, I was surprised no one else was concerned. If you think about if, do you want to do business with Google buying Doubleclick? Interesting, the industry now thinks of Google as the "evil empire", and Microsoft as the "white knight". The other thing, is our members who are ad networks, if they work with a Yahoo/RightMedia or a Googleclick, they are helping other entities who deal directly with advertisers. Anyone who works with Yahoo is supporting their own competition. Since we don't work with advertisers and publishers, we turned those ad networks into allies, not competitors--and that won't change with Microsoft.