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Neal Polachek and I had the opportunity this morning to sit down with Mike Galgon, cheif advertising strategist for Microsoft. Galgon was brought on board as part of Microsoft’s $6 billion acquisition of aQuantive, which he cofounded in 1997.

The $6 billion price tag was was roughly 2x premium at the time of purchase, 10X revenue, and almost 50X cash flow. It was also MSFT’s largest acquisition to date (and double what Google paid for DoubleClick), all showing the company has either lost its mind or it sees transformative capability in the Atlas platform. Galgon’s job is obviously to argue the latter and he makes a strong case.

On a basic level, Atlas will bring MSFT’s ad placement capabilities (display, video, text) beyond MSN to cover the remainder of the Web. It will also be important to compete with Google/DoubleClick (which closed on Tuesday). Galgon in fact believes that consolidation and other factors will cause 80 percent of the online ad placement to be covered by Google and Microsoft, while the remainder will be a fragmented mix of local and vertical ad networks.

He argues that Atlas not only extends addressable ad inventory but also display ad targeting capability at an important time. Behavioral targeting is the key here, to move beyond contextual display advertising where growth is flattening, as it is in search. The next growth curve will come with inventory on other devices or media, such as mobile, IPTV and in-game advertising, where MSFT is embedded in various ways (Windows Live Mobile, Massive, Mediaroom).

Search doesn’t hold the opportunity it once did with slowing revenue growth and Google’s dominance in both user and advertiser market share. But these other ad delivery opportunities are where Microsoft sees the “greenfield.” Atlas is the key to sit between this content and advertisers and agencies (aQuantive-owned Avenue A/Razorfish fits well into the equation).

Whether it was worth the premium is still an important question that will have to be proved in time. But I’m closer to believing than I was yesterday.

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