Microsoft plans to acquire aQuantive, a digital marketing services agency, for around $6 bn (£3bn) in an effort to grow its Internet advertising business.
Microsoft said aQuantive's 2,600 employees will be incorporated into its online services business, dedicated to growing advertising on the company's MSN portal, its Windows Live online services, the Xbox Live gaming platform and Office Live services.
The planned acquisition comes just a month after Google paid $3.1bn for DoubleClick, a network of advertisers and Web publishers, to boost its capabilities in rich media advertising such as banner, graphical and video ads.
While Microsoft lost out in the DoubleClick bidding war, aQuantive represents a significant acquisition for Microsoft, albeit a smaller than the company's rumoured interest in a buyout of Yahoo.
AQuantive will bring new digital advertising software and services for Microsoft to support other services such as on-demand video and IP (Internet Protocol) television.
AQuantive's Avenue A Razorfish service puts together packages of online advertising for its clients. The company has also runs Atlas, a business that offers software and services for digital ad placement. AQuantive has another service, DRIVEpm, that helps advertisers and publishers manage campaigns and ad inventory,
The deal is subject to shareholder and regulatory approval.
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