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April 13, 2007

Google beats Microsoft in DoubleClick bidding battle

Posted by David Hunter at 6:59 PM ET.

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:

Michael Arrington at TechCrunch:

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.

Om Malik at GigaOm:

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.

ValleyWag (Ouch!):

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.

Mathew Ingram:

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.

Filed under Advertising, Coopetition, DoubleClick, General Business, Google, Microsoft

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8 Responses to “Google beats Microsoft in DoubleClick bidding battle”

  1. Microsoft tries to break up Google’s DoubleClick nuptials -- Microsoft News Tracker Says:

    [...] The sight of Google carrying off DoubleClick to the altar has driven rejected suitor Microsoft to extreme measures – an appeal for antitrust regulators to get involved to stop the wedding: Microsoft has released the following statement by Brad Smith, Senior Vice President and General Counsel, Microsoft Corporation, on the proposed acquisition of DoubleClick by Google: [...]

  2. Microsoft eyeing 24/7 Real Media? -- Microsoft News Tracker Says:

    [...] After losing out to Google in the bidding battle for DoubleClick, Microsoft reportedly has its eyes on 24/7 Real Media, another Internet advertising company according to Holly Sanders at the NY Post: Eager to catch up with Google and Yahoo!, Microsoft has emerged as a contender, along with ad giant WPP Group, to buy Internet ad firm 24/7 Real Media, The Post has learned. [...]

  3. Startup #53 - Stealing is Cool « A Startup A Day Says:

    [...] Anyway, to celebrate the discovery of an interesting new blog, I’m going to steal one of his ideas.  It’s #18 on the list – cell phone advertising.  In case you haven’t been paying attention, the biggest acquisitions that have been going on in the tech world have nothing to do with all these cool little Web 2.0 sites.  It’s all around the ad network providers.  DoubleClick to Google for a cool 3.1 BILLION dollars.  aQuantive for $6B to the guys who sign my paycheck.  Pretty wild stuff. [...]

  4. Microsoft acquires AdECN exchange for Web display ads -- Microsoft News Tracker Says:

    [...] There is more information on AdECN at its Web site, but the idea is to provide an exchange like those in the equities market for buyers (advertisers) and sellers (publishers) of display ad space. The concept of an ad exchange is not new – Yahoo acquired Right Media which arguably has the largest such exchange and Google’s tentative acquisition of DoubleClick, for which they outbid Microsoft, also includes the DoubleClick Advertising Exchange. [...]

  5. Microsoft sics lobbyists on Google’s DoubleClick buy -- Microsoft News Tracker Says:

    [...] You may recall that Microsoft was rather upset to be left at the altar when DoubleClick ran off with Google and was vociferous in demanding a detailed antitrust investigation which came to pass when the FTC announced a second stage investigation of the acquisition. Now we find out that just in case the folks in Washington didn’t understand the nuances of their position, Microsoft hired the lobbying firm of Patton Boggs to tell their story: [...]

  6. Yahoo acquires BlueLithium Web ad network -- Microsoft News Tracker Says:

    [...] Yahoo continued the current Web ad network consolidation surge (viz Google buys DoubleClick, Microsoft acquires aQuantive) with today’s announcement of the $300 million purchase of BlueLithium which is reportedly the fifth largest Web ad network in the US and the second largest in the UK. Todd Teresi, SVP, Yahoo! Publisher Network, has more details at the Yodel Anecdotal blog.   Filed under Coopetition, General Business, Yahoo, Ad-supported software, Microsoft   [Permalink] [TrackBack] [...]

  7. This Year in Blogs: The Definitive Posts of 2007 Says:

    [...] "Google beats Microsoft in DoubleClick bidding battle" by David Hunter, Microsoft News Tracker, (GoogleClick? They win another acquisition battle.) [...]

  8. FTC greenlights Google acquisition of DoubleClick | Microsoft News Tracker Says:

    [...] Despite Microsoft’s best efforts to stop Google’s acquisition of DoubleClick, the US Federal Trade Commission (FTC) announced today that they have completed their investigation and have no objections: [...]

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