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By agreeing to pay $3.1 billion for DoubleClick, Google is set to become a true one-stop shop for web advertising. Google gains a network that runs ads across multiple advertising venues, including AOL and Yahoo.
It may be hard to fathom, but Google Inc. is about to become even more dominant in online advertising. By agreeing to pay $3.1 billion to majority shareholder Heller & Friedman for DoubleClick Inc., a major provider of online ad-running services, Google is set to become a true one-stop shop for web advertising. The acquisition, expected to close by year’s end, is subject to customary closing conditions, including regulatory approval.
With DoubleClick, Google gains a network that runs ads across multiple advertising venues, including AOL and Yahoo, providing it with deep penetration into the overall online advertising market, says Aaron Kessler, senior research analyst at investment bank Piper Jaffray & Co.
Google garnered $6.3 billion of U.S. online advertising revenue in February 2007, nearly half of all revenue among the top four online advertising portals and 72% more than second-ranked Yahoo, according to research firm eMarketer. In addition, Google accounted for 32% of all U.S. online advertising in February compared with 18.7% for Yahoo.
“Google has relationships with hundreds of thousands of online advertisers, from top corporations to a slew of mid-size and small companies,” says David Hallerman, senior analyst at eMarketer. “DoubleClick has relationships with thousands of large web publishers. Together they will create a one-stop shop for all types of online advertising purchases.”
“It has been our vision to make Internet advertising better-less intrusive, more effective and more useful,” says Sergey Brin, Google co-founder and president of technology. “Together with DoubleClick, Google will make the Internet more efficient for users, advertisers and publishers.”
The impact of the Google-DoubleClick deal will reverberate throughout the online advertising market, affecting the role of Google’s competitors as well as the fortunes of advertisers and web site publishers that carry online ads, experts say. A big plus for Google would be a larger role in serving video ads, which are expected to triple in revenue by 2010 to nearly $3 billion, eMarketer reports.
Google vs. Microsoft
Many marketers, however, may be wary of dealing with a company that controls a dominant position in both Internet search advertising and networked banner ads, Kessler contends. “Marketers will want some independence between Google and DoubleClick to prevent any one company from having too much information in the advertising market,” he says.
Brad Smith, senior vice president and general counsel at Microsoft Corp., adds: “This raises serious competition and privacy concerns in that it gives the Google/DoubleClick combination unprecedented control in the delivery of online advertising and access to a huge amount of consumer information by tracking what customers do online.”
Others say Google is trying to keep Microsoft from making its own power play. Mark Simon, vice president of search marketing firm Did-It.com, says Google wants to prevent Microsoft from acquiring DoubleClick and strengthening its presence against Google in the online advertising market. Microsoft’s MSN search engine competes with Google but so far has a relatively small share of the search advertising market.
For example, Google wants to prevent Microsoft from gaining an association with the advertising base of AOL Inc., which has many loyal customers and is a major user of DoubleClick’s ad-serving network services, Simon says. Google, which owns a stake in AOL, “wants to keep Microsoft from finding a way into AOL and its base of loyal consumers,” he adds.
On the other hand, Google’s grabbing DoubleClick could offer new opportunities to its competitors if advertisers seek to balance out its new dominance by favoring other providers of ads and networks, Kessler says.
One big winner, he adds, could be aQuantive Inc., whose Atlas unit offers online ad-serving services for both advertisers and publishers and would become the largest ad-serving company with the completion of the Google/DoubleClick deal. AQuantive also owns online ad agency Avenue A | Razorfish.
Although a Google-backed DoubleClick could cut its fees and invest in innovative advertising technology, “it’s possible some DoubleClick customers could turn to aQuantive if they believe Google will have too much data,” Kessler says.