Facebook spends $100m to take advertising fight to Google

Facebook has reached a deal with Microsoft worth $100 million to purchase Atlas, a digital advertising service, as the social network takes the fight to Google in the battle over online advertising.

The long-rumoured deal was confirmed last night, with Facebook known to be searching for new ways to better target adverts to its billion users worldwide.

The acquisition also signals a retrenchment for Microsoft, which has lost billions in its efforts to create an online advertising system than can rival Google’s cash cow.

Facebook is betting that it can do more with Atlas’s service than Microsoft, which has owned the software for five-and-a-half years. Among the features of Atlas’s technology is its ability to track online purchases, showing how internet adverts may have influenced those sales.

For example, if a person buys a new mobile phone online, Atlas is able to show marketing companies how that user saw an advert for the device on several websites on a number of different days.

Facebook said in a statement: “This acquisition will benefit both marketers and users.”

Though the terms of the deal were not disclosed, the American financial network CNBC reported that it was worth $100 million (£66 million).

Atlas is part of an online advertising service called aQuantive, which Microsoft bought for $6.3 billion in 2007. But the acquisition was a major failure, with lack of revenues from the advertising outfit leading to Microsoft absorbing a $6.2 billion charge last year and the first quarterly loss in its 26-year history as a public company.

Facebook is under pressure from shareholders to find ways of improving its advertising system, its main source of revenue. The company currently allows marketers to target adverts at particular groups, based on their demographics and interests. The system helped Facebook sell $4.3 billion in advertising last year, a 36 per cent increase from 2011.

But this performance has not proved to be enough for the markets. Facebook’s stock is yet to recover to the IPO offer price of $38 a share. Shares in the social network fell less than one per cent to $27.03 in early trading today.

According to figures from research firm eMarketer, the online advertising market is worth $42.5 billion in the United States alone. Google is expected to secure about 43 per cent of the market this year, compared to Yahoo! and Microsoft with about 7 per cent and Facebook at 6 per cent.

“It’s always been clear that for Facebook to realise its potential, the company would have to start powering advertising beyond its own site,” said Nate Elliot, an analyst at Forrester.

“The question now is how quickly and successfully Facebook can integrate its data with Atlas’ tools, and whether they can avoid a privacy backlash as they do so. History suggests they’ll struggle on both counts.”

While Google and Facebook have become arch-rivals in recent years, Microsoft has always maintained a close relationship with the social network, being an early investor in the company. After investing $240 million in Facebook in 2007, Microsoft reaped a $249 million windfall last year by selling just 20 per cent of its holdings during Facebook’s stockmarket debut last May.

thetimes