This past week, the Internet’s version of an arms race launched. It started exactly a week ago with articles similar to that published in MediaPost stating, "Microsoft/DoubleClick Deal Seems Likely." Four days later, the likely deal started to seem less likely as word got out that Google has joined the fray to purchase Internet stalwart DoubleClick. Founded in 1996, DoubleClick, in many ways, once occupied a similar position of power and leverage as Google now does. Companies looking to reach consumers had little choice but to interact with them, and both advertisers and publishers found themselves with little leverage when trying to negotiate a deal. Unlike Google, though, DoubleClick today now plays a behind the scenes role only, symbolized perhaps by its being taken private in 2005 by San Francisco-based Heller & Friedman for $1.1 billion. DCLK stopped trading at less than $5 per share, well off its bubble high of $130+.
The same company that took them private has engaged Morgan Stanley to help them make some money off their purchase. Reports from other media sources suggest a price north of $2 billion, not bad for a company whose revenues trail several of the large, private, online direct response shops. The real fun of this story has nothing to do with the price, and everything to do with who will buy them. Those who have worked in the Internet advertising space for a number of years will remember DoubleClick, but for many, especially those in direct response, DoubleClick represents an entirely new, albeit old, name. Those used to running ringtone, certain lead gen verticals, and/or incentive promotion ads would most likely recognize Right Media before DoubleClick.
Another reason that many might have no familiarity with DoubleClick, they have nothing to do with search, nothing to do with email, and unless you have some seriously high converting campaigns, very little to do with arbitragers. The company’s core offerings focus on ad serving solutions for agencies, individual advertisers, and publishers. They help both buyers and sellers of Internet ads manage their ad inventory. For buyers, i.e. advertisers and agencies, they make it (relatively) easy to manage, not only, a suite of ads and sizes, but more importantly any site/placement you wish to run. You can manage a single advertiser with multiple creatives to multiple advertisers with multiple creatives, generating tags to give to sites and viewing reports of performance, with many bells and whistles. Publishers, and in DoubleClick’s case, some very large publishers – AOL and MySpace to name two – can use the platform to coordinate the display of hundreds of advertisers (or more) and thousands of different creatives. Think of them as enterprise level ad scheduling and rotation software.
Microsoft has its own adserver, so why would they need DoubleClick? Two hypotheses I came across suggested that in addition to incremental revenue DoubleClick has better technology that could help MSN do a better job managing its sites. The other hypothesis ties into the first, stating that buying DoubleClick would help MSN if they sought to purchase another Internet property, e.g. Yahoo. DoubleClick wouldn’t help MSN do what Right Media, of which Yahoo owns 20%, monetize their remnant advertising better, but it would help them if they ever sought to manage inventory across more properties than just their own, one potential use being their ad supported software push. Additionally, DoubleClick would help them enter video ad serving, something they most likely have now but do not have any significant technology expertise.
Despite the benefits, I see DoubleClick going to Google, assuming the two companies can work out their culture differences. As others have pointed out, Google doesn’t need DoubleClick. They have their own ad serving platform (they will this year unveil a free ad serving product platform for publishers to manage ads), have relationships with more advertisers than anyone, and a couple hundred million in revenue would barely bump their financials. If Google can stop being Google, they really need DoubleClick. It would provide an infinitely greater win in their quest to do what any media company wants to do – become a one stop shop for all advertisers. They have so much going for them as is, but they have some glaring holes that no doubt eat at them in their quest for advertising dominance – display, branding and, to some extent, video.
Google doesn’t need to buy DoubleClick to hurt Microsoft, one of the many reasons I suspect they bought YouTube. Imagine, though, what DoubleClick could do for them. DoubleClick embodies Madison Avenue, Google only lives there. If DoubleClick represents the head of the Internet – the top sites, premier brand advertisers, and ultimate control, Google represents the tail – volume from a vast network, advertisers that span the gambit but skew towards performance, and baby steps towards transparency. DoubleClick means display. And even though Google has such a vast network, they still mean search. Together, they form the yin and yang of online advertising. If anything, Microsoft should purchase DoubleClick just to make Google work that much harder. A DoubleClick Google combination has the power to fundamentally change the way people view Google and display. And, with DoubleClick heading towards an auction format, it should make it that much more tempting for Google.
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