Google buys DoubleClick – Good? Bad?

April 14, 2007

Yesterday Google announced that they have acquired DoubleClick.  Many blogs are obviously writing about this as it’s a huge deal, both in terms of money ($3.1 Billion), and impact on advertising and competition online betwen the big 3 – Google, Yahoo!, Microsoft. 

I’d like to offer my opinion of why Big G made the purchase, how they did it, and what problems might be popping up for the company with a start-up mentality but corporate muscle.

The Money 

The purchase was made in cash – $3.1 Billion dollars of it. Why cash and not stock? In Google’s 3rd quarter earnings call they stated that all future acquisitions would be in cash and that YouTube was the one time they would use stock.

Now, was $3.1B too much for DoubleClick? Well, Don Dodge, Director of business development and emerging business at Microsoft, the losing suitor, suggested that the inital offer of $2B from the company was “way out of line”.  My take – it depends on what Google does with DoubleClick….how does it integrate? how good are DoubleClicks new technology and offline data? Any problems with culture? etc.

The clear winner is the private equity firm Hellman and Friedman who took DoubleClick private in 2005 and is the majority stake holder having invested $1.1B. A killer deal!

The Good

Being in this industry for a long time and having performed competitve analysis for one of these online giants, this deal is a competitive win for Google.  Here’s why:

1. Google gains an even stronger strangle hold on online advertising.  They now own the contextual and graphic ad worlds online.

2. DoubleClick recently announced it is setting up an exchange for the buying and selling of digital advertisements. This is a new frontier in online ads and could be huge (depending on exectution).  DoubleClick also has the ability to mine offline ad behaviour since it recently joined forces with Abacus. Both of these are huge opportunities and provide even more power for Google. 

3. They further shutting out Microsoft, and give a blow to MS strategy which is increasing staking its business on online products supported by advertising dollars.

The Bad

The issue I see is what it means to Google as a company in terms of culture and strategy. Google internalizes acquisitions, YouTube being the exception so far. Will DoubleClick be internalized? How would that work? The companies have two very different cultures and very different technology processes in development. Poor execution could spell trouble for Google, deep trouble.

The Ugly 

Finally, Google has always been against ‘pop up ads’. DoubleClick is king of the pop up. So, now Google is king of the pop up. A necessary evil I guess if you want to rule all of online advertising.

Wait…what happened to “Do not be evil”?

Consumer, Apple, and Music Services Win…SanDisk, good luck

April 11, 2007

This week has been a great for digital consumers.  First Apple and EMI announce that DRM free music from EMI will now be available on iTunes.  You can play anything (from EMI for now) on any device, not just your iPod. Then Yahoo! and SanDisk announce a wifi device connected to Yahoo! Music. So now we can get the music we want, when we want, and play it on what we want! This was indeed a landmark week.

Apple-EMI: DRM is Dead

This is a giant step towards a free digital world.  I can’t wait for the day I can download everything and anything I want and play it on anything I want, not be told what I can play where. Apple and EMI have taken the first step. It’s a huge step but not a big surprise.

The end of DRM has been forseen for sometime.  There is no way a model where consumers are restricted can survive these days. If the big guys didn’t set the digital world free, upstart technology would have. What is interesting is the consequence of this move for all players in the digital world. Reuters has a great write-up on the winners, losers, and those on the fence that is worth checking out.

 Apple is clearly a winner, but perhaps they didn’t go DRM-free out of the goodness of their heart.  An excerpt from the article:

“The right thing for the customer going forward is to tear down the walls that preclude interoperability by going DRM-free,” Apple CEO Steve Jobs says. It also avoids having to license its FairPlay DRM to rival technology companies, something it was loathe to do. As a bonus, a move to higher-quality audio files will drive the need for iPods with greater storage capacities (at likely higher price tags). And the company benefits from timing its announcement to overshadow word of an European antitrust probe into iTunes pricing.

Yahoo! – SanDisk

The news was good but the timing was bad.  Just happened to be the same time Apple-EMI made thier announcement and also when Apple announced the sale of the 100 millionth iPod.  But again, the news was good.

For the first time, users of a music service (Yahoo!) can connect anytime and anywhere to get the music they want using Sansa Connect. No more docking, no more syncing, just connect, download and enjoy. Even better, it adds a little competition to Apple. 

100 milion iPods is a lot. But if there is one thing that will have consumers seriously thinking about switching, it’s the ability to go wireless. So, it means either iPods become more affordable to compete or, and 95% more likey, we finally get iPod wifi!

The news is great for Yahoo! greater for Apple, and amazing for the rest of us.  Unfortunately, it might not end up so good for SanDisk. 

Here’s how I see things playing out:

1. iTunes go DRM free so now they can be played on any device

2. iPod wifi hits the market

3. Apple signs deals with Yahoo!, Microsoft, and every other music provider

4. People can download from iTunes or any service they’ve subscribed to and get their music anytime, anywhere.

The 800-pound gets together with the other gorillas and they stomp on….until the next great disruption of the wild and crazy digital world.