Google could shake up online ad market with DoubleClick buy, analysts say

Google Inc. would extend its dominance of the online advertising market from search advertising into ad networks and banner ads if it bought DoubleClick Inc., say analysts commenting on widespread reports that Google may seek to outbid Microsoft Corp. and other potential suitors for DoubleClick.

By acquiring DoubleClick, Google would gain 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. “The intermediate advertising market is increasingly attractive as an ad-serving and ad networking environment,” he says.

Hellman & Friedman, the private equity firm that holds a majority stake in DoubleClick, is reportedly seeking about $2 billion for the company, a figure that represents a fair value, Kessler says.

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Google, Microsoft and DoubleClick have declined to comment about interest in an acquisition of DoubleClick.

Mark Simon, vice president of search marketing firm Did-It.com, says the main reason Google would want DoubleClick is to prevent Microsoft from acquiring it and strengthening its presence 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. “Google’s main benefit is strictly defensive,” he says.

For example, he says, Google wants to prevent Microsoft from gaining an association with the advertising base of AOL Inc., which has a lot of loyal customers and is a major user of DoubleClick’s ad-serving network services. Google, which owns a stake in AOL, “wants to keep Microsoft from finding a way into AOL and its base of loyal consumers,” Simon says.

Kessler adds that marketers should be wary of dealing with a company like Google that controlled a dominant position in both Internet search advertising and networked banner ads. “Marketers will want some independence between Google and DoubleClick to prevent any one company from having too much information on the advertising market,” he says.