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Microsoft Pays Premium for Online Ad Firm

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Microsoft Pays Premium for Online Ad Firm

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Microsoft Pays Premium for Online Ad Firm

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ANDREA SEABROOK, Host:

Microsoft is about to make its largest acquisition ever. It's about to pay a whopping $6 billion to buy aQuantive, a company that consolidates Web advertising.

NPR's Laura Sydell reports.

LAURA SYDELL: Microsoft is paying a premium price for aQuantive. The online ad company's stock has hovered around $35 a share and Microsoft is paying more than $66 a share to buy it.

The software company has been trying to plant itself firmly into the online world but so far has lagged behind both search giant Google and Web portal Yahoo! The steep price tag reflects the heated battle between major Internet players for a slice of the growing online advertising business, says Brendan Barnicle, an analyst with Pacific Securities.

BRENDAN BARNICLE: So they are using aQuantive as a way to really jumpstart that effort. You know, as a way to really try and close the gap on online advertising sites and since they failed miserably on the search site. This is a way to really try and play catch-up.

SYDELL: The acquisition is part of consolidation all across the online advertising market. Last month, Google purchased Double Click for more than $3 billion and Yahoo! followed by snatching up the 80 percent of RightMedia that it did not already own.

But Microsoft is probably most worried about Google, says Barnicle. Well, online search and advertising is where Google still dominates, the company has been developing online applications that can compete with Microsoft Windows.

So, Barnicle says Microsoft is trying to encroach on some of Google's territory.

BARNICLE: This is Microsoft's attempt to try and play a little defense and come back at Google.

SYDELL: Barnicle says Microsoft is going to face some challenges integrating aQuantive, which despite its large price tag could get lost within the giant Redmond-based company.

But he says online advertising is growing by 20 percent a year, and Microsoft wants to make sure to get a piece of that market.

Laura Sydell, NPR News, San Francisco.

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