Avenue A benefits changing with sale to Microsoft

Employees at interactive advertising agency Avenue A | Razorfish had a couple of questions on their minds when they heard this spring that their parent company, aQuantive, was to be acquired by Microsoft:

Do we get to keep our Macs? And will we be getting the same benefits as Microsoft employees?

The Macs stayed.

But employees at the agency, headquartered in Seattle and with offices around the world, just found out that they're not in line for the Microsoft benefits.

However, their counterparts in aQuantive's other divisions, Atlas and DRIVEpm, will get the Microsoft package, which includes 100 percent employer-paid health insurance. Before the acquisition, all of aQuantive's employees received the same basic compensation package.

Avenue A President Clark Kokich told employees Wednesday that while the advertising agency is in the marketing and technology-services industry, Microsoft's benefits are based on the software- and media-industry model.

"[W]e believe it is no longer tenable for us to attempt to treat all parts of our business the same. It would mean causing AA|RF to conform so closely to the software and media model as to make it non-competitive within its own industry," Kokich wrote in the e-mail, which was obtained by The Seattle Times.

Early next year, Avenue A will begin designing a new compensation package, tweaking its approach to salary, benefits, bonus, titles, levels, tools, career development and performance management. Kokich said the company wants to recruit and retain the best talent in its industry.

The new package will take effect July 1, 2008, the beginning of Microsoft's fiscal year. Atlas and DRIVEpm employees will be fully integrated into Microsoft's benefits program at that time, as well. Atlas handles technology to manage and track ads and DRIVEpm buys Web space and sells it to advertisers.

Microsoft paid $6 billion for aQuantive, its largest acquisition ever, in a bid to build a top-to-bottom offering in the growing online advertising business. The company had about 2,600 employees when the deal closed in August. The majority worked in the advertising division, which contributed nearly 60 percent of aQuantive's sales. Avenue A currently has 1,944 employees worldwide, 223 of whom work in the Seattle area.

It wasn't clear in Kokich's e-mail whether the change would mean an inferior compensation package for Avenue A employees, either relative to current levels or to Microsoft benefits. But some employees read between the lines and were disappointed, though not entirely surprised.

"If we were going to get an even better package, then one would think they'd really want to emphasize that. Or, if our current benefits package were already better, the messaging would have been 'if we match Microsoft, our compensation and benefits would be lower than the marketing and technologies services industry, and would thus make us unable to attract the highest quality talent,' " an Avenue A employee said in an e-mail. "But that's not the way people are taking Clark's words."

The employee said the news fueled speculation that Microsoft may be planning to spin off the agency. Microsoft has pledged to operate Avenue A at "arm's length" to avoid any appearance of a conflict of interest. (Avenue A represents companies who purchase advertising on Microsoft properties and those of its competitors.)

"This is not in any way an indication of an intent or desire to spin out Avenue A | Razorfish at all," said Tom Phillips, a spokesman for Microsoft's new Advertiser and Publisher Solutions group. "It is all about making sure that Avenue A | Razorfish stays competitive, within the Microsoft organization."

He said it's too early to say how the Avenue A package will compare because "it's yet to be designed."

"It will be something that will resonate with Avenue A | Razorfish employees, we believe, because we're going to spend a good amount of time talking with them about it," he said.

In general, entry-level compensation in the advertising industry "has really slipped behind other industries," said Elizabeth Zea, partner at Gilbert and Company, a New York-based management consultancy and executive recruiting firm focused on marketing companies.

Starting salaries in the Teach For America program and the Internal Revenue Service — let alone consumer packaged goods, management consulting or investment banking — are higher than pay for average entry-level assistant account executives. Those jobs pay about $28,000 to $35,000 a year, Zea said.

Meanwhile, individuals fluent in both digital media and business and marketing strategy are the most sought-after and can earn much more for their skills.

"Those are the toughest people to find, and they tend to get a premium when you can find them in terms of salary," she said.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com