The rumors of Google and Microsoft bidding up DoubleClick were apparently true and Google has come away the winner:
Google Inc. announced today a definitive agreement to acquire DoubleClick Inc., a global leader in digital marketing technology and services, for $3.1 billion in cash from San Francisco-based private equity firm Hellman & Friedman along with JMI Equity and management.
I’ve previously stated my opinion that DoubleClick was merely a relict from the last Web bubble since its expertise is in banner ads. That doesn’t mean they are in a bad business, just one past its prime although it is one that seems to appeal to Microsoft’s advertising predilections. That may be one of the reasons Google got out its wallet as Louise Story and Miguel Helft report at the NY Times:
The sale brings to an end weeks of a bidding battle between Microsoft and Google. Microsoft has been trying to catch Google in the online advertising business, and the loss of DoubleClick would be a a major setback.
“Keeping Microsoft away from DoubleClick is worth billions to Google,” an analyst with RBC Capital Markets, Jordan Rohan, said.
There’s more in the article about value to Google beyond a “prevent defense”:
The sale offers Google access to DoubleClick’s advertisement software and, more importantly, its relationships with Web publishers, advertisers and advertising agencies.
For months, Google has been trying to expand its foothold in online advertising into display ads, the area where DoubleClick is strongest. Google made its name and still generates most of its revenue from search and contextual text ads.
DoubleClick, which was founded in 1996, provides display ads on Web sites like MySpace, The Wall Street Journal and America Online as well as software to help those sites maximize ad revenue. The company also helps ad buyers — advertisers and ad agencies — manage and measure the effectiveness of their rich media, search and other online ads.
DoubleClick has also recently introduced a Nasdaq-like exchange for online ads that analysts say could be lucrative for Google.
“Google really wants to get into the display advertising business in a big way, and they don’t have the relationships they need to make it happen,” said Dave Morgan, the chairman of Tacoda, an online advertising network. “But DoubleClick does. It gives them immediate access to those relationships.”
It’s a nice theory if you like antiques, but if the reported revenues of $150 million a year (or even $300 million according to the Times article) are correct, it still doesn’t add up unless keeping DoubleClick away from Microsoft really is the hidden value for Google.
Update: Various punditry:
10x revenue for a mature company is a…healthy…valuation. At least part of the acquisition price appears to be due to a desire by Google to keep this asset out of Microsoft’s hands.
Google just bought Double Click for $3.1 billion, news which wasn’t received too well by the stock market – shares are trading down a buck-and-change a share. The all-cash deal is almost twice what Google paid for YouTube, the New York Times reports. The amount Google spent is shade under Google’s revenues in the fourth quarter of 2006 ($3.21 billion) and what the company earned in entire 2006.
Thank the internet gods that Google is focusing again on internet advertising, where much remains to be done; and that Doubleclick did not go to Microsoft, which would have let the online ad company languish.
Happiest player in this deal? The company that bought DoubleClick for $1.1-billion about two years ago and then sold off some assets for about $500-million.