Web 3.0 & MSN (Part 4)

Acquisition Strategy

Microsoft acquired Medstory and aQuantive this year. Actually both were very good acquisitions. Online Health is a large segment with 31% of the total U.S. Internet users or 55.3 million U.S. Internet audience visiting health information sites each month during the first quarter of 2007. Buying aQuantive was a shrewd move. With the aQuantive acquisition, Microsoft has got a portfolio of great interactive ad agencies, including Avenue A/ Razorfish, and their corresponding relationships with major advertisers.

Recently it also picked up a 1.6% stake in Facebook. There is talk of a MSN Facebook, not confirmed yet. The Company is evaluating various other acquisition targets. I feel the future acquisitions of MSN should be focused on strengthening its key verticals and improving the Web 3.0 features of the sites.

MSN Health is among the top three players in the online health industry and this segment is growing rapidly. MSN could consider acquiring health-related social networking sites like DailyStrength or PatientsLikeMe. DailyStrength has closed its first round of venture financing with Redpoint Ventures. In February 2007, PatientsLikeMe raised $5 million in Series A round financing from CommerceNet, Omidyar Network, Collaborative Seed and Growth Partners, LLC and Invus, LP. WebMD is also a possibility, although that would be a much larger acquisition.

MSN Money is a leading personal finance site in the U.S. and with over 61% of the Internet users using the Internet to research stocks or check their bank accounts and other personal finance stuff it is an emerging segment. The Company could consider acquiring sites like Kiplinger, SeekingAlpha, or PhatInvestor. Seeking Alpha is looking for an exit, and can presumably be acquired for not a lot of money. It lacks a good ad sales force, and pairing it with the MSN ad sales team, could turn this asset into a good bet. One caveat, however, is that MSN Money’s ad sales team is not getting the level of CPM traction that sites like Forbes.com and CNNMoney are getting, something Microsoft needs to address if it wants to continue building out its Finance vertical.

MSNBC is a leading News property from the house of MSN and with social News catching up Digg could be a very good acquisition target for MSNBC. Digg raised $8.5 million in funding led by previous investors Greylock Partners and the Omidyar Network in December 2006. Previous to this it had raised $2.8 million.

In the travel category, the Company could acquire Priceline, or Orbitz. The Company could even consider trying to buy TripAdvisor from Expedia, as the latter has been mulling a spinoff of TripAdvisor. The irony of the Travel segment is that Expedia was born inside Microsoft, taken public, and now it has ended up with a large stake from IAC. Microsoft should have held on to this one!

That’s it. I would stop right there, and not try to build out every vertical, if I were Microsoft. Rather, the focus should go back to rolling up the Enterprise 3.0 space – SaaS players like Concur, Omniture, Taleo, Success Factors, etc. that play to Microsoft’s strength in business software.

(To Be Continued)

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This segment is part 4 in the series : Web 3.0 & MSN
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