Media: All about ... Google's takeover of DoubleClick

By Alasdair Reid, campaignlive.co.uk, Friday, 27 April 2007 12:00AM

The proposed acquisition has alarmed Google's rivals.

There's something rather charmless about the Google company motto: "Don't be evil." Apparently, the senior executives who thought it up at a brainstorming session thought their first choice, "Be good", sounded a bit feeble and silly, so they began casting around for something that would convey the same sort of sentiment.

So, instead of moving blithely through the corporate world dispensing Panglossian goodwill, the company finds itself in a bleaker and far more complex metaphysical struggle with the forces of darkness. And it's not doing terribly well, according to some commentators.

In fact, Google's latest deal is so wicked, that even Bill Gates is up in arms. Gates, the Microsoft founder and, in the eyes of digital economy commentators, the monopolist's monopolist, complaining about a deal that might create a virtual monopoly? Whatever next?

But Gates was not alone in calling for Google's $3.1 billion proposed acquisition of the online ad server company DoubleClick to be subjected to regulatory scrutiny. The Yahoo! corporate machine was none too ecstatic either - a bit rich given the rumour that it, like Microsoft, had been in advanced talks with DoubleClick.

DoubleClick is one of the unsung giants of online advertising - as the infrastructure operator that makes sure the right advertising copy gets from advertiser or agency servers to the right websites at the right time, it's the glue that holds the more prominent and visible parts together. It is utterly dominant in its sector, with its only serious rival, Atlas, trailing by a huge margin.

So, considering Google already has the search business in its back pocket, if the deal goes through, the company will, it is estimated, have an interest in around 85 per cent of the world's online market by value.

All of which makes Google's apparent U-turn even more understandable. Not so very long ago, the company's considered opinion was that display advertising had a negligible role to play in the future development of the online economy.

Tellingly, the company is sensitive to accusations that its previous analyses were wrong. Witness last week's statement from the Google co-founder Sergey Brin, in which he tried to argue that this sort of move had been part of the plan all along: "It has been our vision to make internet advertising better - less intrusive, more effective and more useful. Together with DoubleClick, Google will make the internet more efficient for end users, advertisers and publishers."

1. Headquartered in New York, DoubleClick not only provides ad serving technology for both banner and video-streamed advertising, but also monitors the performance of those ads in terms of targeting and response. It no longer sells inventory, so it's arguably not one of the prime movers in the online advertising economy. But it's a lot more than a mere supplier of back-office software, thanks to the primacy of its performance-monitoring data within the whole online media planning process. It has 17 network offices globally and employs more than 1,200 people.

2. Microsoft has been most prominent among rival companies in voicing opposition to the deal. In a statement, its general counsel, Brad Smith, stated: "We think this merger deserves close scrutiny from regulatory authorities to ensure a competitive online advertising market." He added that it raises serious privacy issues - it gives the Google/DoubleClick unprecedented control in the delivery of online advertising and access to a huge amount of consumer information through its expertise in tracking online activity.

3. Privacy concerns have continually dogged DoubleClick. In 1999, its founders, Kevin O'Connor and Dwight Merriman, sold it for $1.7 billion to Abacus Direct. In order to monitor ad performance, the DoubleClick software uses cookies to track the behaviour of those who interact with banners. DoubleClick has always insisted that information is depersonalised - but there were fears this would change following the Abacus deal. When the company was acquired in 2005 by Hellman & Friedman and delisted from the Nasdaq exchange, the new owners sold Abacus. But Google's rivals now fear data on ads served on their sites will be used against them.

4. Google signalled the size of its ambitions beyond its core search business by acquiring YouTube for $1.65 billion in November 2006. Last week, Google reported first-quarter profits of $1 billion on revenues of $3.66 billion.

WHAT IT MEANS FOR ...

RIVAL INTERNET COMPANIES

- The Google chief executive, Eric Schmidt, scoffed at assertions from rivals, including Microsoft, Yahoo!, AT&T and AOL, that this deal will have antitrust implications.

- He argues that DoubleClick is hardly the only company active in the online business - and that, in fact, it represents less than 1 per cent of a business worth almost $1,000,000 million. Some will find this argument disingenuous at best. DoubleClick is dominant in its particular sector of this market. Add this to Google's dominance of search and you have a recipe for trouble.

- But if the deal does get clearance from the regulators, it will probably trigger a ferocious round of consolidation in the online media and advertising market. There has already been speculation in the US, for instance, that Microsoft's MSN and Yahoo! have been in exploratory talks. These talks will have been given greater urgency, not just by the DoubleClick deal, but by Yahoo!'s disappointing first-quarter results - profits were down by 11 per cent to $142 million.

ADVERTISERS

- They won't say it publicly, of course (why give hostages to fortune?), but most advertisers will not be wildly enthusiastic about Google acquiring even more leverage in the online advertising market.

- Sir Martin Sorrell, WPP's chief executive, who once termed Google "the frienemy" of the agency world, says the deal raises questions for advertisers, especially regarding Google's use of client data: "It's (Google) a short-term friend and a long-term enemy, and probably the shorter term just got a little bit shorter and the longer term got a bit closer as a result of the DoubleClick acquisition."

This article was first published on campaignlive.co.uk

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