The price, a 10 times multiple of Doubleclick's revenue, staggered even Silicon Valley veterans. It dwarfs earlier estimates that Doubleclick was on the market for $2 billion; but it was a small price for Google to pay to keep Microsoft (which was also said to be interested in the company) or any other rival from getting it.
Forrester senior analyst Shar VanBoskirk said the price "is almost inexpensive for what Google secures. They're now the unequivocal leader in the online space."
Getting a better foothold in display advertising was cited as a business reason for the acquisition, as was streamlining the ability to buy an integrated search-and-display campaign.
"This merger is really part of a global growth strategy for Google," said Google CEO Eric Schmidt, on a conference call late this afternoon from Argentina, where Google is opening its latest sales office. "It's way of solving end-to-end problems for both search and display with the two leaders in the field." He added the acquisition was "something we've thought about for a very long time." The deal will take the rest of the year to finalize, executives said.
Co-Founder and President-Technology Sergey Brin, who was also on the call, said display advertising has been important to Google for awhile and that the company had done a lot of work on products in the space. But while Google has a burgeoning display business in its AdSense network, it has struggled to attract brand advertisers because it doesn't accept third-party ad serving.
Yahoo's Panama play
Yahoo, meanwhile, has long been the leader in online display advertising, and its introduction of its Panama search platform was widely seen as a way for it to compete against Google, the search leader by a wide margin. With this move, Google puts even more competitive pressure on Yahoo.
"Display and brand advertising today, we've made a fair amount of traction and we clearly heard from customers and the agency community that they wanted us to continue to make more investments in brand-related products," said Tim Armstrong, in an interview with Advertising Age. "A lot of them are DoubleClick customers."
DoubleClick offers ad-serving and ad-management technologies and counts among its customers content publishers such as News Corp. and AOL and the majority of the interactive advertising agencies. Its important, behind-the-scenes role in the online ad space helps publishers manage inventory and provides agencies a streamlined, all-in-one-place reporting of their online advertising activities. It also recently announced plans to create a media exchange for online inventory.
DoubleClick is a child of the first dot-com boom, founded in 1996 and is two years older than Google. It was purchased by private-equity giant Hellman & Friedman in 2005 for $1.1 billion. DoubleClick also owns Performics, the largest search-marketing firm. Incidentally, Doubleclick's headquarters in New York are in the same building as Google's New York operations.
Martin Reidy, president of Modem Media, thinks advertisers will get a better product out of the acquisition. "I like the fact DoubleClick is partnered with a strong company," he said. "You always think are they funding it for the future or for window dressing? Google has vision; people are clamoring for better metrics and I think that's what you're going to get." But, he warned, "[microsoft's] MSN will have to do something more dramatic now. The game can't be over."
Buyers are warily optimistic
Online media buyers were warily optimistic. The acquisition gives Google an inside view into the data and analytics behind online ads. "It's in the data that the power resides," said David L. Smith, CEO of Mediasmith, San Francisco, who cautioned that there could be challenges to the deal, because of a fear that it places too much online advertising power in one place. "There's no effective counter any of the other players in the online space could make," he added.
What Google intends to do with that leadership is make life easier for marketers, at least that how Mr. Armstrong paints it. "Taking a big step back, if you listen to two largest customer needs, one is to spend more money online and the second is to make operations more effective and let them spend more time on knowledge management rather than spreadsheet management."
Google will have to take great steps to assure advertisers that Google the publisher won't have access to Google the ad-server's ad-serving secrets.
"It's both interesting and a little scary," said Bryan Wiener, CEO of 360i. He's particularly excited about the ability to run a truly integrated search and display campaign -- something no one's put together yet. But he said it's scary because of the concentration of power.