Advertising group Publicis has agreed to purchase Microsoft-owned ad firm Razorfish for $530 million in an attempt to increase its position in digital communications. Publicis will pay for the agency with cash and 6.5 million of its shares, worth $232.6 million. The deal will leave Microsoft with about 3% of Publicis stock when it closes in the fourth quarter.

As part of the arrangement, the two companies have entered a "strategic alliance" which includes a five-year media-buying relationship. In exchange for purchasing a certain amount of display and search advertising on Microsoft properties, Publicis will be given a break on ad rates. Publicis CEO Maurice Levy said the terms would be disclosed after regulators rule on the deal.

As marketers move their ad dollars from the ailing conventional media to the Web, ad firms are scrambling to keep pace. Publcis has acquired a number of digital operations, including a $1.6 billion purchase of Digitas, a Boston digital ad firm. The company said digital advertising presently represents 20.8% of its revenue, and it will account for 25% of its revenue after the Razorfish deal.