April 13, 2007 5:00 PM PDT

Google buys ad firm DoubleClick for $3.1 billion

In its largest acquisition yet, Google has agreed to pay $3.1 billion in cash for online ad company DoubleClick, the companies announced Friday.

The deal gives Google a large network of advertisers and Web publishers to serve and sell ads to, and it boosts the search giant's banner advertising business, which lagged rival Yahoo's.

"The most compelling argument (for the deal) is it is accelerating our display advertising business," Google Chief Executive Eric Schmidt said on a conference call with reporters and analysts. "I'm calling from Argentina where Google is opening its latest sales and support office...I was so excited about this."

The acquisition, which is expected to close sometime later this year, also will give media agencies and advertisers the ability to manage integrated search and display ad campaigns through one centralized console, Schmidt said. "The whole system will run faster," he said. "Users will benefit from more targeted ads."

Google is buying DoubleClick from San Francisco-based private equity firm Hellman & Friedman, which acquired DoubleClick two years ago for $1.1 billion, and JMI Equity and Management. The deal is subject to regulatory approval. David Drummond, senior vice president of corporate development at Google, said he was confident antitrust and other regulators would approve the agreement.

The announcement puts to rest rumors reported by The Wall Street Journal of a heated bidding war over DoubleClick between Google, Microsoft and even Yahoo and AOL. A Microsoft spokesperson said the company had no comment on those reports.

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Eric Schmidt talks about what Google's $3.1 billion acquisition of DoubleClick means for his company.

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Forrester analyst Charlene Li said Google can not only better compete with Yahoo's strong display advertising business but make it even harder for Microsoft, which recently launched its own search advertising system, to jump in.

Google thought about buying DoubleClick for a "very long time," Schmidt said. DoubleClick is housed in the same building as Google's New York office, and employees of the two companies are on friendly terms. The companies have similar cultures and have been partners for a long time, Google executives said. "We'd had informal chats before, but the alignment wasn't there," Schmidt said.

With this purchase, Google breaks its own previous record for acquisition price: It paid $1.65 billion in stock for YouTube last year.

The DoubleClick purchase is worth the price for Google, Li said. "Google has been trying to get into the display ad market for years. It was going to be a long slog for them to compete with DoubleClick for those advertiser relationships."

"They've just locked it up," she added. "They can leverage the relationships they have between display, search and transactions (with Google Checkout) better than anyone else can, and that justifies the premium price they paid. In that way it was a 'must-buy' for Google."

Asked whether Google would make information from search results available to display advertisers for targeting purposes using DoubleClick's system, Google co-founder Sergey Brin said it was unlikely. "Overall, we care very much about end-user privacy and that's really going to take the No. 1 priority when we contemplate new products," he said.

DoubleClick created a firestorm of controversy in the late 1990s with its efforts to combine consumer online and offline data and to track activity and target ads based on user profiles. The company was forced to kill an "intelligent" targeting service it had launched in 2000 that served ads based on consumers' personal tastes. Two years ago, the company settled state and federal lawsuits that charged it with surreptitiously tracking and collecting consumers' personally identifiable data and combining it with information on their Web surfing habits.

In addition to beefing up its online advertising business, Google has been aggressively expanding into offline advertising, including television with a deal earlier this week with satellite company DirecTV. It targeted radio by purchasing radio ad company dMarc, and print, with a deal with a group of newspapers.

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9 comments

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What ever happened to "Do no evil?"
NT
Posted by amadensor (248 comments )
Reply Link Flag
they will see it differently.
one thing I know about companies is that there is a breaking point when it comes to decision making and profits.

The bigger a company gets, the greater the effort is needed to focus on meeting revenue requirements. Ultimately there will be trade-offs made to keep the company profitable and healthy. 3B is a big purchase, and an obvious marriage of the information google already has, and the infrastructure they're buying is inevitable.

They have the can, and the can opener. Guess what goes next?
Posted by sean710 (2 comments )
Link Flag
Next Acquisition is to create Cheap TV Spots
The next logical acquisition is Spotrunner, Spotzer, or the very first
international internet-based TV ad agency Cheap-TV-Spots.com.
I'd say 90 days for an announcement because things in the area of
web video are moving so fast. My guess (and you're not going to
believe this), is Spotzer. Of course, I never thought Google would
top $200, either. ;-)
Posted by theCorpCOO (5 comments )
Reply Link Flag
Google is not "stifling innovation".
I used to be someone who lamented at every major buyout, thinking that it inevitably led to a diminution in overall innovation. But ultimately, that has never been proven; especially with the Internet.

Frankly, buyouts like Google/Doubleclick are often an organic market-based means of shaking out the excesses, and creating clarity in the market for the next wave of innovations.

Never forget that Google came on the scene at a time when, it seemed, that the "search engines" market was saturated with Yahoo! et al. Similarly, even Google's current position in Internet video (i.e., YouTube) is precarious. That market is still very wide open, and so nebulous. It's the perfect playground for new innovators. And that's only one aspect of the Internet.

Another point: Google's acquisitions have not been "hostile takeovers". I'm sure DoubleClick's original investors are quite pleased with 3.1b in cash.

It's okay for a once-fledging, "new age" (whatever that means) company to grow into an enormous leviathan. As long as there are other pathways to the market (no matter how narrow, no matter how labyrinthian), new companies will use their perspicacity, creativity and perserverance to ensure a robust market overall.

ESPECIALLY on the Internet.
Posted by ltvnet (2 comments )
Reply Link Flag
Doesn't matter to me.
It used to be about coal people buying railroads, etc, now it is all about buying and selling information. I say way to go Google. However, pretty soon they might become too big and will probably be broken up as were corporations that were too large in the past and stifled competition because of it.

As for me, I have DoubleClick as well as all advertising website blocked with my Smoothwall / DansGuardian setup. All for free.
Posted by WxULM (4 comments )
Reply Link Flag
Integrative analysis of pros and cons of this deal
<a class="jive-link-external" href="http://*******.com/2a8kcx" target="_newWindow">http://*******.com/2a8kcx</a>

In the above URL you can find and read about the different pros and cons of the Google-Doubleclick deal focusing on impact on customer base, technology, products (bundling), competition, strategy, innovation, legal and pricing.

There is also a short overview of the key eMarketing trends as to embed the analysis some more.
Posted by vangeest (1 comment )
Reply Link Flag
Google already has monopoly in online advertising in the form of AdWords and AdSense. I hope they don't create a monopoly in this field too.
Posted by netsafire (2 comments )
Reply Link Flag
 

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