Feds Extend Review of Google's Admeld Acquisition

Move Ups Odds That DOJ Will Ultimately Impose Conditions on the Deal

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Google will have to wait a little longer to close its nearly $400 million deal to acquire Admeld, as the Department of Justice decided today to extend its inquiry while it studies Google's increasingly dominant position in the online ad ecosystem.

The DOJ's initial 30-day review period expired today; the agency had the option of dropping the investigation or extending it to a "second request" for information. Publishers contacted by Ad Age said those requests started coming early this week.

While routine, a second request increases the odds that the Justice Department will ultimately impose conditions on the deal or even file a complaint to block it, though few believe that 's a strong possibility.

Admeld is the latest piece of an online ad infrastructure that includes ad serving (DoubleClick), an exchange (AdEx), a demand-side platform (Invite Media) and creative optimization (Teracent). The goal is to make digital advertising more efficient and simple, but the fear is that Google is also building a dominant position that locks in buyers and sellers, squeezing competitors out of the value chain.

"This doesn't surprise us, as today's display advertising industry is very new and highly complex," Neal Mohan, Google's VP of display advertising, said in a statement. "But we'll work to enable this review to be concluded as quickly as possible."

Executives questioned by DOJ investigators said they seemed well-versed in the complex world of ad exchanges, ad servers and other technologies, but they haven't looked at the market closely since a flurry of deals in 2007 and 2008 that had Google buying DoubleClick, Microsoft buying aQuantive and WPP buying 24/7 Real Media. They seemed particularly concerned with the impact the deal would have on Microsoft and Yahoo, rather than the group of mostly startups, such as Rubicon Project, Pubmatic or Turn, that compete with Admeld.

They also questioned executives for evidence that Google had exhibited any anti-competitive behavior as a result of its increasing power, and to inquire as to how easy it is for publishers to opt out of Google's technologies, or if Google was doing uneconomic deals to win market share in display advertising.

A spokesperson at the DOJ declined to comment.

"Google is the 800-pound gorilla. They own the pole position in the digital ad-supply chain," said Jay Sears, general manager of a competing exchange, ContextWeb. "The question is whether that 's good for the ecosystem, and as a buyer, how do you feel about that ?"

Google has been accused by its competitors of offering ad serving and exchange services at steep discounts to publishers and agencies to win business. Admeld is a tool for publishers that helps them decide which ad to show to a visitor based on the amount an advertiser is willing to pay to reach the consumer. Its clients are higher-end publishers such as Weather Channel and NBC Universal, giving Google access to more-premium ad impressions.

So far, Google's display ad strategy appears to be working. Its ad exchange, which started from nothing a few years ago, is now the industry's largest by volume by most accounts, bigger than Yahoo's Right Media, WPP's 24/7 Real Media or AppNexus, which powers Microsoft's ad exchange.

Yet online advertising is still a small subset of overall marketing dollars, and the portion of that transacted in real time through Wall Street -like trading desks is smaller still. Admeld and Forrester estimated the real-time online ad market at $823 million in 2011, or less than 7% of the expected $12.3 billion that will be spent on online display advertising in 2011, according to eMarketer.

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