Doubleclick's takeover of NetGravity marks the start of what is expected to be continued consolidation in online advertising services, a move that ultimately should benefit advertisers by producing stronger suppliers with the clout to set industry standards.
"At the end of the day, [the merger] is good news for advertisers and agencies," said Drew Ianni, an analyst at Jupiter Communications. The merger, announced June 13, brings together DoubleClick, which sells ad space on 1,500 sites worldwide, including 125 U.S. Web publishers, and provides centralized tracking and reporting for online media campaigns for advertisers, and NetGravity, a developer of packaged software it sells to Web publishers and advertisers to serve and track ads in-house. Earlier this year, NetGravity also launched AdCenter for Agencies, a service bureau model similar to DoubleClick's.
With the $530 million stock buyout, DoubleClick gains NetGravity's software, giving it a packaged product to sell advertisers.
"Both companies are interested in solving advertisers' problems," said Kevin O'Connor, chairman-CEO of DoubleClick. "Now we have more solutions."
NetGravity competes against players such as AdForce, AdKnowledge and MatchLogic.
Experts said they believe the merger with NetGravity will enable DoubleClick to improve the quality of its DART ad-tracking technology.
"[DART] is a big part of DoubleClick's business and is deployed widely, although there have been some discussions in the industry about the technical quality of DART," Mr. Ianni said. Being able to offer NetGravity's software solution in addition to its outsourced service will position DoubleClick as a more dominant player in the market. "It's a very powerful arrow to have in your quiver when going to people and trying to win their business," Mr. Ianni said.
Much of DoubleClick's success, however, will depend on how it integrates NetGravity's people, products and culture with its own, said Mitch Bennett, president of MatchLogic, a Web advertising database and ad-serving company owned by Excite@Home.
DoubleClick could be a competitor to MatchLogic, but only after it has integrated NetGravity and Abacus Direct, a direct marketing research company DoubleClick agreed to buy last month, Mr. Bennett said.
MatchLogic, which provides an outsourced ad-serving and tracking service to advertisers and agencies, serves ads across the DoubleClick Network of sites and also works closely with NetGravity; NetGravity has licensed MatchLogic's technology for demographic targeting.
Mr. Bennett said he was unsure how the merger would affect MatchLogic's relationship with NetGravity.
"If [DoubleClick] is going to bring NetGravity under its umbrella, they should take their time with such an initiative," Mr. Ianni said. "There are some strong clients that chose NetGravity over DART. [DoubleClick] should not shake up NetGravity's client relationships too suddenly."
HELPING PUSH STANDARDS
The merger with NetGravity may aid DoubleClick in its push to have its DART technology accepted as the industry standard for ad serving and tracking.
DoubleClick "Advertisers will have more choices as well as increased standardization," said Mr. O'Connor.
"[DoubleClick] is pushing hard for DART to be the standard and this gives them exposure to another large client base to get that done," Mr. Ianni said.
Supplier mergers, not always welcome by ad buyers, could prove good news in this case by creating stronger players with the clout to set standards while not being so large as to dominate the industry, he said.
Consolidation is routine in rapidly evolving industries, experts said.
"I think this is a good move for the industry and I think we'll see continued consolidation," Mr. Bennett said, adding that Excite@Home's MatchLogic has considered mergers.
Meanwhile, following its own lead, DoubleClick was rumored to be considering acquiring 24/7 Media, New York, another ad network. Both companies declined to comment on such a deal.
Copyright July 1999, Crain Communications Inc.