Saturday, April 14, 2007

Huge News from WSJ: Google to Acquire DoubleClick

Google to Pay $3.1 Billion
For Web Firm DoubleClick
April 14, 2007; Page A3

Google Inc. said Friday that it would purchase Internet services company DoubleClick Inc. for $3.1 billion, marking another big foray into the heart of the Web economy.
[Eric Schmidt]

The price represents a stunning change in valuation for the company, given that it fetched $1.1 billion in 2005, and has since sold off parts of itself to other parties. Among others, Microsoft Corp., had been vying for control of New York-based DoubleClick, which is controlled by San Francisco private-equity firm Hellman & Friedman.

The price represents a roughly 800% return for DoubleClick's owners, who paid about $330 million of equity for the company, and reaped a combined $3.5 billion from Friday's deal and the sale of another business unit.

"This was heavy-duty business building that private equity does enormously well," said Hellman & Friedman's Philip Hammarskjold.

In adding DoubleClick, Google pushes deeper into the business of placing, or "serving," the electronic advertisements that dot Web sites.

"The most important thing is that the ad will come faster and will be much more targeted," Google Chief Executive Eric Schmidt said in an interview.

• Google Joins Race to Buy DoubleClick

• DoubleClick Explores A Sale

• DoubleClick to Be Bought for $1.1 Billion

But it also complicates Google's already fraught relationships with Web publishers, who often rely on Google for advertising revenue and traffic, but worry that Google's ever-growing market power may somehow crimp their own growth plans.

DoubleClick also brings a vast list of relationships with Web publishers and advertisers that Google could use to move its online-ad offerings beyond the small text ads that it places alongside search results.

Customers include Time Warner Inc.'s AOL and News Corp.'s MySpace. The company also runs a service called Performics, which among other offerings, works with advertisers to help place ads on Internet search engines, such as Google.

Many Web publishers rely on ad-serving services such as DoubleClick's to insert ads on the fly when a visitor pulls up a Web page. Some advertisers and their agencies depend on DoubleClick to deliver their ads to the Web pages.

The ad-serving that DoubleClick does would be an obvious complement to Google's push to sell more graphical and video advertising. When it has sold ads for other publishers through its online advertising system, Google serves ads for those publishers, but it generally doesn't serve ads that weren't bought through its system. People familiar with the matter say Google has been preparing a service that could serve ads on sites even when Google itself hasn't sold the ads.

The deal comes as Google also expands its ad-brokering services into offline media, such as print, radio and television.

This deal could put significant pressure on Yahoo Inc., as it gives Google direct relationships with display advertisers, an area of traditional strength for Yahoo.

An agreement would also mark a second time that Google has outdistanced Microsoft. In 2005 it beat out the software maker for a partnership in AOL. Some Microsoft executives are convinced Google is making such investments mainly as a defense.

Losing DoubleClick also adds a roadblock to Microsoft's goal of entering search and advertising areas that Google hasn't staked out yet. DoubleClick would have given Microsoft instant entry into the market for running ads on other companies' Web sites. Now Microsoft may have to build its own service if it decides to compete. That approach has proved difficult for Microsoft.

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