The US software giant splashed $6.3bn in cash on aQuantive, as it looked to boost its own search-related advertising business and the Bing search engine.
At the time, 2007, it was Microsoft's biggest ever acquisition, although that has since been eclipsed by the $8.5bn purchase of internet telephony firm Skype last year.
The writedown, which effectively wipes off the aQuantive acquisition's value, came about after Microsoft judged that the deal had not accelerated growth "to the degree anticipated".
But Microsoft said that the writedown would not affect its ongoing business, and there was little impact on the firm's share price after the announcement yesterday.
Microsoft acquired aQuantive as part of plans to boost its Bing search engine and also take on the dominant Google in the lucrative market for search-related advertising.
The writedown is expected to rule out any profit for the company's fourth quarter, as Wall Street had expected the firm to report a net profit of around $5.25bn on July 19.
Microsoft also said that it expects the Online Services Division - which includes Bing - to report growth and profitability "lower than previous estimates" after the writedown.
"Bing search share in the US has been increasing, revenue per search (RPS) has been growing, MSN is the No. 1 portal in 29 markets worldwide and the company's partnership with Yahoo! has continued to expand geographically," said Microsoft.
"While the Online Services Division business has been improving, the company's expectations for future growth and profitability are lower than previous estimates.
"Microsoft completed its acquisition of aQuantive on Aug. 13, 2007, in an all-cash transaction valued at just over $6.3 billion. While the aQuantive acquisition continues to provide tools for Microsoft's online advertising efforts, the acquisition did not accelerate growth to the degree anticipated, contributing to the write down.
"Microsoft does not expect this accounting write down to affect its ongoing business or financial performance."