At Arm’s Length: Managing a Parent Company Dynamic

Since its acquisition of aQuantive in 2007, there’s been a bit of chatter around whether Microsoft should divest itself of the search marketing businesses it gained as part of the deal, namely Avenue A | Razorfish. Those in favor of this believe it’s a conflict of interest for Microsoft to own these types of businesses and also own the third most popular search engine.

The concern is twofold. The first is fear that Avenue A | Razorfish search engine optimization (SEO) teams could be granted access to the search engine’s algorithm or other proprietary information and gain an unfair competitive advantage in the search engine result pages (SERPs). The other concern is one of preferential treatment within the engine. This applies to organic and paid search, as the agency competes in both services.

Clearly the relationship between a global parent company and a related marketing acquisition is fraught with overlap, but ethical operating procedures can address these issues and maintain harmony. As the VP of SEO and Analytics at Avenue A | Razorfish, I can say that when it comes to interaction with our parent company, the stated and lived mantra is: “at arm’s length.”

What follows is a candid discussion on managing the ethical considerations between Microsoft and Avenue A | Razorfish. Many critics oversimplify this relationship as one between a search engine owner and a search agency. In truth, Live Search is just one small component of Microsoft’s overall operations, and SEO is just one discipline among Avenue A | Razorfish’s online marketing arsenal. If conflicts are truly to be avoided, however, these components must still remain separate.

Just How Long an Arm Are We Talking Here?

As stated previously, the modus operandi for Microsoft and Avenue A | Razorfish interaction is “at arm’s length.” And the arm length here belongs to Shaquille O’Neal, not Mini-Me.

Avenue A | Razorfish operates in much the same manner it did before the acquisition, and hasn’t received any special access from a search perspective. However, we had to adjust our operations to synch up with the Microsoft fiscal year (which runs June to May and not January to December for some reason), and we were added to a couple corporate newsletter lists.

What does it truly mean to be “at arm’s length?” It means clear divisions of information between parent and acquisition. It means no special treatment within Microsoft owned properties. And most importantly, it means continued separation between engine and agency.

No Back Room Deals

A chief concern of guys like Robert Murray, the president of the search firm iProspect, is that a Microsoft relationship may bias certain clients towards Avenue A | Razorfish.

Murray needn’t worry about competitive bias because Avenue A | Razorfish doesn’t receive wholesale prices on paid search clicks in Live Search. Our paid search managers have access to the same tools, information, and search auction place as any other advertiser – and nothing more. Microsoft treats us like any other customer; we have the same sales people, same product feedback sessions, same lousy editorial process … believe me, we feel your pain.

The “at arm’s length” philosophy even extends to contracted Microsoft search opportunities. Just because Avenue A | Razorfish is connected to Microsoft doesn’t mean that it will be the agency of record (AOR) or even the contracted agency for a Microsoft engagement. This helps level the playing field between the acquired agency and competitors. Just like any other agency, Avenue A | Razorfish must bid on work at Microsoft, from Web development to search.

Search? Yes, Microsoft sees the value of its Web properties showing up well in the Google and Yahoo SERPs, much the same way our other clients do. Prior to the acquisition, Microsoft has had other search agencies with AOR status for their search needs. We need to bid on this work in the same way these agencies do, but we do so without the AOR title bestowed upon us.

Size Matters

In managing potential conflicts between Microsoft and Avenue A | Razorfish’s SEO department, its helps, oddly enough, to be number three. Because Live Search is only the third most popular search engine, there’s really only so much that may be gleaned by an agency anyway, rendering potential inside information relatively sedate. In a Google-driven search landscape, an advantage on engine number three is akin to having an in with Arby’s; it’s all well and good, but the general public is still flocking to McDonald’s in droves.

Avenue A | Razorfish addresses Google first in its SEO campaigns, despite its parent company. It boils down to raw market share. If Google owns 70 percent (or more) of the search engine market, then it’s folly to consider any other engine before it. This strategy is just common sense and poses far more of a conflict to the DoubleClicks of the world.

It’s a Big Family

If Microsoft is the patriarch then Avenue A | Razorfish is the step-cousin twice removed in the rather big, if not giant, family. Operating at “arm’s length” from the rest of the corporation, Avenue A | Razorfish doesn’t experience the intimacy of being involved in a tight-knit family unit, but operates individually within the greater group. There’s no nepotism or preferential treatment, only the occasional holiday party appearance.

While other offerings of aQuantive such as Atlas, DrivePM, and FranchiseGator are being integrated wholeheartedly into the Microsoft family, Avenue A | Razorfish must remain aloof. This is due both to the level at which other aQuantive offerings can aid the Microsoft landscape, and to the relatively low conflict such offerings cause in integration. While Avenue A | Razorfish is a worthwhile acquisition, it’s a challenging one because it represents a new channel not yet fully explorer by the global corporation. Though the viability of the agency is without question, a respectable distance helps keep everyone honest.

Collusion Isn’t Worth the Risk

Even without subscribing to the “no evil” policy of Google, anyone can recognize that search engine and agency collusion wouldn’t be worth the risk in an open market space. In terms of engine size, this is self-evident for Microsoft, and in terms of reputation it would mean the destruction of both agency and engine alike.

All things considered, information sharing between Microsoft and Avenue A | Razorfish just isn’t worth the risk. Not doing evil aside, seeking an advantage in the third most popular search engine just isn’t smart business. No matter the circumstances, a clear division between engine and marketer operations will always be necessary to maintain the integrity of both professions.

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