Microsoft-DoubleClick Talk Shines Light on Ad Serving

Possible Deal Could Lead to a Network or Online Media Exchange

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NEW YORK (AdAge.com) -- Suddenly, third-party ad serving is hot. A deal that would have Microsoft acquiring DoubleClick would be full of real and symbolic benefits for the Redmond, Wash.-based company and could trigger a slew of other similar deals as other online giants and even ad-holding companies try to jump into the ad management game.
Ad-management technologies like DoubleClick's are decidedly unsexy but play a very important role in internet advertising, powering the behind-the-scenes delivery and reporting of ads served up to a user's computer.
Ad-management technologies like DoubleClick's are decidedly unsexy but play a very important role in internet advertising, powering the behind-the-scenes delivery and reporting of ads served up to a user's computer.

The potential Microsoft-DoubleClick acquisition was raised earlier this week in The Wall Street Journal.

Behind-the-scenes role
Ad-management technologies are decidedly unsexy but play a very important role in internet advertising, powering the behind-the-scenes delivery and reporting of ads served up to a user's computer. DoubleClick's clients include publishers, such as News Corp. and AOL, that use the technology to decide which ad to place where on a page, in order to maximize revenue and abide by campaign rules.

Ad agencies also use DoubleClick to provide a streamlined, all-in-one-place reporting of their online advertising activities.

For Microsoft, adding DoubleClick to its arsenal could give it a jump start in trying to create an ad network or media exchange, should it choose to do so, and a deep pool of digital talent at a time when shortages abound.

Michael Walrath, CEO of Right Media, an exchange for internet ad inventory, said that for either an ad network or an exchange, "having customer relationships with [publishers] is a nice first step." Mr. Walrath was a senior VP at DoubleClick before launching Right Media in 2003.

Deepen agency relationships?
Having an integral agency tool such as DoubleClick could also help deepen Microsoft's relationship with the online media agencies, although it would be unlikely to result in dramatic ad allocation changes. DoubleClick is a market-services company that facilitates the online marketing actions of its clients -- it's not the one funneling money from one web property to another.

If this deal happens, it will be interesting to see how Microsoft states its intentions to incorporate DoubleClick into its online strategy. Being both a marketing services firm and a publisher is a difficult tightrope to walk, noted one agency executive.

Perhaps most important, on a symbolic level, it would signal Microsoft was putting its money where its mouth is -- and getting out in front of Google.

"[Microsoft] wants to show the market they care about online advertising," said Dave Morgan, chairman of Tacoda. "There's nothing like making a billion dollar bet to do it." He thinks it's the most significant transaction in the space since News Corp. bought MySpace, not because of the dollar amount, which is reportedly about $2 billion, but because of the signal it sends about Microsoft -- that it is, indeed, all about advertising.

Going after Google
Neither Microsoft nor DoubleClick would comment on what they called "rumors and speculation," but CEO Steve Ballmer has made no secret he's hungry to try to overtake Google, which he recently called a one-trick pony at a talk at Stanford Business School. But Microsoft's plans in the online ad space have been criticized as "me too" versions of things other players are doing. Acquiring DoubleClick would plant it firmly ahead of Google in the ad-serving space.

Several industry watchers believe a Microsoft acquisition of DoubleClick could trigger a swath of other deals in the space. If Microsoft or Google enter the ad management space in a meaningful way, said Mr. Walrath, "it forces other companies to consider that space."

DoubleClick is owned by private-equity firm Hellman & Friedman.
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