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Summary:

If there was any need for proof that Google considers advertising its core competency, then last few days provide ample testimony to that fact. The Mountain View, Calif.-based company has partnered with Clear Channel Communications to sell radio ads, a move that follows their decision to […]

If there was any need for proof that Google considers advertising its core competency, then last few days provide ample testimony to that fact. The Mountain View, Calif.-based company has partnered with Clear Channel Communications to sell radio ads, a move that follows their decision to snap up DoubleClick for $3.1 billion which has been the big news of the weekend.

The DoubleClick acquisition showed that Google is willing to spend any amount of money to defend its advertising turf. The deal has also prompted AT&T, Yahoo and Microsoft to cry foul and whisper to media about an anti-trust investigation, a preposterous notion, considering that Microsoft had a chance to outbid Google.

To get a more realistic perspective on Google’s decision to buy DoubleClick, I reached out to Mark Kingdon, CEO of Organic, Inc., a leading online marketing firm that works closely with Fortune 1000 companies. Mark is an expert in Internet branding and online advertising. We met when I was reporting a story for Business 2.0, and since then I have come to rely on him as a barometer of sanity when it comes to online advertising. I did a short interview with him, to get his take on Google’s move to buy DoubleClick. Here are some excerpts.

Om: There are some who believe that this deal marks the return of the banner. What do you say to that?

Mark: Did it ever go away?

Om: Is this an attempt by Google to exert more control on the advertising market and at the same time keep competitors at bay?

Mark: DoubleClick is a very strong complement to Google’s dominant search offering. If Google develops an equally strong offering in video, gaming (AdScape), mobile and digital outdoor, they could offer advertisers a way of reaching consumers just about anywhere in the digital world.

Om: What is the real value of DoubleClick?

Mark: This was a strategic purchase. They locked out a competitor (Microsoft) and expanded their core business in a closely related area. It is Business 101. It’s about speed to competitive advantage. Google gets a leader in placing display advertising which brings along a very large advertiser base. Google has a big brain trust and will likely find new ways to aggregate, segment and optimize.

Om: If you look beyond today, how does this acqusition help Google? Does this buy them time, as the advertising industry tries and figure out its future models?

Mark: Advertisers buy what they know and they innovate on the edge so Google is expanding its relationships and market coverage. Everything that’s happening on the edge is having a gut-wrenching impact on the big middle. Think about YouTube and its impact on big media. Business models are slow to change when billions of dollars are at stake.

Om: Both Google and DoubleClick are moving ahead and setting up ad-exchanges. Are they a key component to this deal?

Mark: TBD. It sounds like an obvious direction for Google to take. Add in real- or near-real time optimization across different digital media and you have a mouth-watering concept. Everything from commodities to collectibles are sold on exchanges so why not ads? Here’s why: there is a big business built on the buying and selling of ad space. It comfortable, familiar and very profitable for the participants.

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  1. $3.1 billion, in cash, is a hefty price for DoubleClick, and a big slap for microsoft! DoubleClick generated about $300 million in revenue last year, and the combined force of these two ad giants coould be very strong. Executives at Microsoft must be going crazy as its online mistakes stack up, one after another. It will be interesting to see online ad marketplace competition unfold itself in the days to come.

  2. Under any scenarios or valuation methodologies, at 3.1 billion, this was a foolish and ill-advised purchase.

    Microsoft (or Yahoo) weren’t “beaten to the punch” on this; they’ve got the money and could have certainly paid more…if they’d wanted to.

    They’re both just smarter than that.

  3. Which proves the answer I got here: http://snipurl.com/1go3n . It’s all about money and power. Google is just acting like any big corporation would.

  4. RandomThoughts Monday, April 16, 2007

    Om, I wonder if Microsoft was really interested in DoubleClick or were they just hanging around to make Google pay more? I think Microsoft did this when AOL was up for bids, and I have a feeling they may have been playing the same game with DoubleClick.

    Make your competitor pay more for everything they do and you make your life easier, especially when it doesn’t cost you anything.

  5. MSFT’s ability to outbid Google for DoubleClick might be used to counter elements of an antitrust claim (monopoly = monopoly power in a relevant market and anti-competitive conduct) but by itself, it does not say much about the whether such a claim has legs.

  6. RandomThoughts: Great line of thinking. Although, at some stage Microsoft has to make its own game better rather than pushing Google to outperform … lol

    I admire Google’s guts to take risks. Sorry guys but Google is at least trying to build the future. Yahoo and Microsoft on the other hand are struggling unsuccessfully to find the gumption to drive anything remotely innovative.

  7. Peter Brockmann Monday, April 16, 2007

    I see this deal as a positive for Google. It’s about access to market. Google dominates the small, local business markets while DoubleClick has the tier 1 advertisers. Bringing products to both segments creates value that didn’t exist before.

    I scored this a B grade (http://www.brockmann.com/index.php?option=com_content&task=blogsection&id=11&Itemid=53) most because customers didn’t seem to mind to go here for display, and go there for search advertising. Timing could have been better for Google – like last year?

    AT&T and Microsoft will get nowhere with the anti-trust regulators. They put more weight into the documents that Google and DoubleClick shared with their boards and officers.

  8. My question to all who say that Microsoft forced Google to pay more for DoubleClick ?
    What should Google have spend the money on otherwise?
    It’s not like they are a technology company and require a lot of research for future products.
    My guess is only iff we switch clients to more local context driven systems to take advantage of the multi core architecture of future cpus will Google get in trouble, i.e changing search by sharing context between client and server automatically. Microsoft as usual bounces from Tree to Tree without seeing the woods they are in, or the advantage they got.

  9. Participate Media » Blog Archive » Today, April 16, on BuzzTracker Monday, April 16, 2007

    [...] at GigaOM, Om Malik interviews the CEO of Organic, Inc. to find out exactly what motivated Google to buy [...]

  10. Shoob » Blog Archive » links for 2007-04-16 Monday, April 16, 2007

    [...] Why Google bought DoubleClick Om Malik discute avec Mark Kingdon, CEO d’ Organic, sur le rachat de DoubleClick par Google. (tags: google doubleclick) [...]

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