Microsoft in Targeted Acquisition Mode, Picks Up Navic Networks

Microsoft Corp., with a view to expanding its digital advertising services, bought Waltham, Mass-based Navic Networks, an eight year old company that develops technology for digital TV advertisements. While Microsoft made the announcement regarding the acquisition Wednesday morning, there has been no mention of the terms and conditions of the deal so far.

There has also been no mention officially of the price tag for the deal, though unofficial sources say it could be anywhere between $200 million and $300 million. With this acquisition, Microsoft joins arch rivals Yahoo, Goggle, and AOL, and other start-ups like Spot Runner in the world of online advertising.

Speaking about the acquisition, the general manager for emerging media of Microsoft’s advertising and publishing solutions group Scott Ferris said, “Navic is a great illustration of the continued investment that Microsoft is making in the TV space.”

The acquisition also seems to be part of Microsoft’s plan of making targeted acquisitions. In a letter to employees, Microsoft’s platform and services division president Kevin Johnson had said in May, “Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform, and help us grow scale in key geographies.”

With a staff strength of over 80 employees, Navic Networks develops interactive technology that is already up and running on about 35 million set top boxes so far. The company was able to raise capital to the tune of approximately $43 million between 1999 and 2001 from a number of funders, including Highland Capital Partners, Himalaya Capital, Pilot House Ventures, Gary Lauder, and Pequot, now known as FirstMark Capital.

Microsoft understands the significance of television advertising today and the large volume of revenue generation possible from that medium. It also realizes that while Navic allows for TV ads to be interactive, it still is unable to link it back to ad campaigns on the Internet, and that is where it hopes to be able to step in and brig the advertising process full circle.

Other companies are also moving towards merging TV advertising with the online ad market. Two companies that come immediately to mind are Google and Spot Runner, though neither of them has been able to achieve the completion that Microsoft aims to achieve.

Microsoft currently ranks third in terms of online ad space in the United States, with Google leading the market. Navi has had a strong market presence, working with companies like Ford Motor Co., Allstate Corp., Nissan Motor Co., and Wal-Mart Stores Inc.