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 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!
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 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.
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”?