Microsoft Buys LinkExchange For $250 Million

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November 06, 1998 (9:02 AM EST)

Microsoft Buys LinkExchange For $250 Million

By Malcolm Maclachlan,

It's business as usual for Microsoft, which announced Thursday that it is buying Internet advertising network LinkExchange for $250 million.

The purchase is one of a number of recent deals for Microsoft, which is continuing with its strategy of buying companies and moving into new markets despite the ongoing government antitrust case against it.

LinkExchange is best known for its ad-banner network, the service it started with in March 1996. It now lets 400,000 member sites share ads.

Members host ads in exchange for getting their own ads hosted on the network. It also offers another of other services for improving website promotion.

Many of these members are small personal home pages offering goods and services. Nevertheless, LinkExchange is known for its extensive reach. According to Web research company RelevantKnowledge, the LinkExchange network reached 22 million unique Web users in September. This gave the company 42 percent reach, eclipsing advertising network competitors such as 24/7 Media and DoubleClick.

Microsoft said it plans to use the 100-employee San Francisco-based company as part of its portal play, offering information and services to Web surfers under the Microsoft Network (MSN) banner. LinkExchange members will now get exposure on Microsoft Web properties such as Expedia, CarPoint, and Hotmail.

Microsoft has been revamping its portal presence for the past several months. In July, it brought all its Web content and service properties under the MSN umbrella. Late last month, it relaunched its Sidewalk site, which offers local content for several U.S. metropolitan areas, MSN Sidewalk.

The LinkExchange buy is perhaps the most dramatic example Microsoft is not going to let the pending case with the government stop it from pursuing the expansion strategy that has served it so well. Hours before the deal was announced, Microsoft said it would enter a partnership with Qualcomm on wireless communications.

Tuesday, it announced a new version of Windows NT for embedded devices, to complement its Win CE operating system.

Microsoft is also continuing to plan for competition from other OSes. Over the weekend, Linux evanagelist Eric Raymond posted a document on his website showing Microsoft discussions about heading off competition from Linux, the open source version of Unix. The Halloween Document analyzes the open source movement and ways it defeats it. Microsoft has acknowledged the authenticity of the document, but said it does not reflect official policy.

The document shows the Redmond, Wash., software giant is not afraid of getting in another tussle, such as its ongoing Java dispute with Sun Microsystems, said Rob Enderle, an analyst with Giga Information Group, in Norwell, Mass. In fact, he said, the embedded NT release probably has something to do with Linux, by targeting a market where Linux might gain popularity.

While the government's court case may be affecting the way things are done behind the scenes at Microsoft, he added, we should not expect to see the company turn into a shrinking violet.

"In terms of acquisitions, it doesn't seem to be doing much," Enderle said. "It is a highly competitive company."