One of the long-running rumours in the mobile advertising industry is that Microsoft is going to buy Millennial Media, one of the larger mobile ad networks, to expand its mobile ad business.
Today, we heard more second-hand rumours that Microsoft is still in talks with Millennial. Specifically, an industry source tells us he has heard deal gossip from mobile publishers and people in Washington, D.C. over the last few weeks. This person says that Microsoft has been negotiating with Millennial for the last two months, and that the companies have agreed on basic terms but have not finalised a deal.
If Microsoft did pull the trigger, this would follow Google’s $750 million deal to buy mobile ad network AdMob — still pending U.S. government approval — and Apple’s $275 million deal to buy Quattro Wireless.
So, will it happen? We’re sceptical.
Why? Microsoft doesn’t need Millennial — it already has some mobile ad products in-house, including some via its acquisition of mobile ad firm ScreenTonic in 2007. There’s no pressing need to buy Millennial, and if Google’s AdMob deal goes through, it especially wouldn’t need to buy it to keep it out of Google’s hands.
One case for the deal: While Microsoft’s mobile ad business is mostly focused on MSN mobile, Bing, and its ad deals with wireless carriers like Verizon, acquiring Millennial could quickly give Microsoft broader reach across more publishers and in mobile apps on the iPhone, Android, and other platforms. According to Nielsen, Millennial reaches more than 80% of U.S. mobile Web users, while Microsoft brags today that it reaches “nearly half” of that audience.
Again, Microsoft doesn’t necessarily need to be in these businesses. But if Apple and Google both start offering great ad services to iPhone and Android developers, Microsoft may have to offer a competitive service for its Windows Phone 7 platform. Though, this could probably be done with its in-house assets, too.
Millennial wouldn’t comment on the rumours, and Microsoft didn’t immediately respond to our request. But other mobile ad players wasted no time turning their noses at the rumours.
“Last I heard was [Microsoft] weren’t interested,” one industry exec says. “[Millennial] was too much like Screentonic, which didn’t really move the needle for them. That and that Millennial’s price was likely too high.”
“I would be shocked,” said another. “Microsoft never seemed to be big Millennial fans. Maybe they changed their tune.”
Another theory is that Microsoft is waiting to see if (and how) Google’s AdMob deal goes through to pull the trigger. Yet another is that because of the state of the mobile ad industry — early but potentially explosive — everyone is simply talking to everyone.
How much would Millennial fetch? We don’t know what its current valuation — set by its $16 million Series C round last November — looks like. But we imagine it’d want more than $500 million.
If mobile advertising turns out to be as big an industry as some think it will, that could end up being a good deal. But so far, it’s still a speculative bet. And while Microsoft has the cash, it could probably be better spent elsewhere.
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