Google Spends $3.1 Billion To Buy DoubleClick
Google said yesterday that it planned to acquire Internet advertising company DoubleClick for $3.1 billion, a deal that would expand the search firm's presence into online banner advertising and raise the stakes for its competitors, such as Yahoo and Microsoft.
The purchase, which Google said will be made in cash, would accelerate the Mountain View, Calif., company's effort to extend its business beyond the small text ads that appear next to Web search results. Microsoft had been trying to outbid Google for DoubleClick, an online ad broker that sells banner and video Web ads. Yahoo also competes in the market. Another large DoubleClick competitor, Advertising.com, is owned by AOL, a division of Time Warner.
Internet advertising spending rose 17 percent last year from 2005, to $9.8 billion, far faster than traditional media, according to TNS Media Intelligence, an advertising research firm.
"The combination of the two companies, with YouTube, will be able to bring a much better experience for advertisers," Google co-founder Sergey Brin said during a conference call yesterday. Google purchased YouTube, the popular Internet video site, for $1.8 billion last fall.
The DoubleClick acquisition is part of Google's ambition to become a one-stop shop for advertisers of all sizes. Last fall, Google opened a large office in Manhattan to court major advertisers. The company has increased its staff, hiring away executives from top media companies and ad agencies not only for its online ad business but also to experiment with selling ads for radio, newspapers, magazines and television.
Some advertisers say Google's attempt to sell more online ads for Fortune 500 firms has gotten off to a slow start. Some ad agencies complained that Google tried to go around them and work directly with advertisers, and advertisers complained that many Google employees assigned to work with them knew little about the industries to which they were assigned.
With the DoubleClick acquisition, "Google is building a very efficient apparatus for buying and selling ads online, and that's fundamentally a great thing for the Internet economy," said Jarvis Coffin, chief executive of Burst Media, a DoubleClick competitor. "It's starting to look like the advertising agency of the future."
Google said the DoubleClick purchase will smooth the company's expansion. Advertisers now work with Google for text ads and firms such as DoubleClick for display ads. Analyzing the return on their spending has been tough for advertisers, said Susan Wojcicki, Google's vice president of product management.
"The plan is, by making the system more efficient and unified, it will facilitate the process," Wojcicki said in a conference call last evening. "This is an exciting opportunity."
Google is buying DoubleClick from private-equity firm Hellman & Friedman, which purchased the company in July 2005 for $1.1 billion. The sale marks a turnaround for DoubleClick, one of the firms that were successful in the early Internet boom of the mid-1990s. After the tech bubble burst, DoubleClick shrank but survived by reorganizing.
Google said it expected the acquisition to be approved by regulators and finalized later this year. For the first 90 days, DoubleClick will continue to operate as it does now while executives put together a plan to incorporate elements of its operations into Google's advertising offerings, the company said.
"If the synergies all work . . . the return is very, very strong," said Eric Schmidt, Google's chief executive. "And the reason is that the DoubleClick platform touches so many of the Google customers and so it accelerates our entry by some number of years into some of these new businesses."
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I must say, i think this is a very shrewd business move on the part of Google, not only will they in essence wipe out competition from Yahoo, its going to make it extremely difficult for MSN to catch up with them now.
Should be interesting to see how Google shares do with this deal :)
Regards,
Lee
