Microsoft Makes Smart Acquisition

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RaptMicrosoft announced that it is acquiring Rapt, a provider of advertising yield management solutions for digital media publishers. Rapt’s system is used by a number of big players like Microsoft, Yahoo, CNET Networks, Dow Jones & Company, Expedia, Fox Interactive Media and a number of well recognized web properties.

So what is Rapt and why is this a smart acquisition?

I came across Rapt last week while I was looking for solutions that help companies manage what could be called the advertising supply chain. And to understand Rapt, I think helps to a have a perspective on sales and operations planning and supply chain optimization. (which is something we have done a lot of)

Putting it simply, sales and operations planning is all about coordinating sales efforts with production. In the case of advertising, it means projecting how much inventory of what type (eg units, demos, etc) will be available looking out into the future and what that means for sales goals. It also includes the sales force communicating the markets demand for inventory of different types and the ongoing process of trying to match demand with supply. Once we have a sales and operations plan, its up to the sales force to sell and the supply chain to deliver.

Arming the sales force with the right information about what promises they can make to customers can make an enormous difference in terms of sell through and in terms of price realization.

On supply chain side, supply chain optimization means serving the right advertisement in the right place at the right time in a way that maximizes the revenue that can be produced on an ongoing basis. Doing this requires balancing the number of ads, placement of ads and a whole bunch of other factors. Doing this at large scale is not easy. Doing it well is worth a lot in terms of extra revenue capture.

From what I can tell, this is what Rapt’s solution helps companies manage.

This capability is at the heart of the advertising supply chain for any large publisher. And that’s why I think this is a very smart acquisition by Microsoft. The combination of Rapt’s ability to plan, coordinate and optimize the advertising supply chain and Atlas’ campaign management and ad serving capabilities should be a very compelling solution that will help Microsoft be a central player in the advertising supply chain.

And the icing on the cake is that this system is being used by both Microsoft and by Yahoo for managing their respective advertising sales and supply chains. Strategically, Microsoft blocks someone else from acquiring Rapt and screwing up their ability to integrate Yahoo and Microsoft’s ad sales and supply chain operations.

More discussion of this acquisition can be found here, here, here and here.

If you know more about Rapt, leave us a comment.

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[tags]Microsoft, Rapt, advertising supply chain[/tags]

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