String of Digital Deals Leaves Ad World Baffled

ANA, Others Struggle to Understand Implications of Web Giants' Recent Buys

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NEW YORK ( -- The major advertising-industry associations have voiced their concerns over all the recent mergers-and-acquisitions activity in the online-advertising space, most notably the proposed acquisition of DoubleClick by Google. And the reasoning behind the associations' pleas to government officials for careful scrutiny points to just how difficult deciphering this new space will be.
Bob Liodice

Bob Liodice

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"We looked at the whole portfolio of acquisitions and said the whole thing is moving very, very quickly," said Association of National Advertisers CEO Bob Liodice. "We don't have the ability to understand the implications."

The question is: Can anyone?

FTC inquiry
The Federal Trade Commission will try -- at least in the case of Google's acquisition of DoubleClick. It notified the two companies May 25 that it would seek additional information about their businesses and the deal.

Mr. Liodice is quick to point out that the ANA's concern is not just over the Google-DoubleClick merger, but over all the activity in the space. Since Google's announcement of its acquisition, Yahoo has made public its intent to buy out the remaining 80% share of online-advertising firm Right Media for $680 million, WPP Group said it would buy online-advertising company 24/7 Real Media for $649 million and Microsoft planned an acquisition of aQuantive, which owns Atlas, Drive PM and Avenue A/ Razorfish, for $6 billion. But Google-DoubleClick will be the first to be scrutinized, and thus may set a precedent for the rest of the category.

All antitrust reviews begin with determining what the relevant market is -- itself hard to define. Is it all online advertising, expected in 2007 to be a $20 billion business in the U.S.? Or is it all of the $300 billion domestic advertising business that gets done on every platform, even traditional media? After all, what happens when set-top boxes for TVs become digital -- will Google-DoubleClick have a platform to reach those? Then there's determining market share, a picture clouded by the fact that DoubleClick is a privately held company and few have clear indications of exactly how many online ads the company actually touches. The FTC will likely ask several large publishers to supply ad logs so it can begin to determine such a figure.

Big chunk
One interested party supplied some numbers to Ad Age, estimating that a merged Google-DoubleClick will serve ads representing nearly $8 out of every $10 on third-party websites. That estimate is based on the assumption that in the market of nonsearch ads to third-party publishers, Google is responsible for 29% and DoubleClick 49%.

Another competitor estimated DoubleClick has a 40% share of the publisher ad-serving market and a 60% share of the advertiser ad-serving market but wasn't exactly sure what percentage of total ads served online each day would be touched by Google-DoubleClick. Google, for its part, didn't comment on those figures but is confident the acquisition will be approved. Stated Don Harrison, senior corporate counsel: "Numerous independent analysts and academics have determined after looking at this acquisition that the online-advertising industry is a dynamic and evolving space -- as evidenced by a number of recently announced acquisitions -- and that rich competition in this industry will bring more relevant ads to consumers and more choices for advertisers and website publishers."

According to filings for the fourth quarter of 2006, Google took in $1.2 billion in global advertising across its off-site network during that time period -- although some of that includes revenue from search affiliates, which the company doesn't break out. According to the IAB's fourth-quarter estimates, the most recent available, U.S. display advertising totaled $1.6 billion.

Competitors cry foul
While all the FTC considerations are private in an antitrust case, at stake is the ability of other parties to innovate and enter the online-advertising space, assuring a fair market in which a monopoly can't drive up prices. Shortly after the acquisition was announced, lawyers from AT&T and Microsoft sprang into action, asserting that the combination would limit growth and put Google in a position to be able to choose the winners and losers in the space. Others have suggested Google would be privy to so much competitive pricing data through DoubleClick, which has deals with many other publishers, that it could undercut the competition in its own online-ad pricing.

A letter from the ANA and the American Association of Advertising Agencies to the FTC and the Department of Justice said, "Whichever regulatory authority reviews the terms of the proposed transactions, it should undertake a careful, wide-ranging and comprehensive perspective."
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