Google to buy DoubleClick for $3.1 billion
SAN JOSE, Calif. - Google has once again thwarted Microsoft's Internet ambitions, announcing Friday that it has agreed to buy DoubleClick, a maker of advertising software, for $3.1 billion in cash.
"DoubleClick is in a unique position to strengthen advertising and the advertising business of Google," said Eric Schmidt, Google's chief executive.
DoubleClick, which sells software that allows leading publishers like AOL and News Corp. to display advertising on their Web sites, will enable Google to accelerate its display advertising business, a lucrative area where Google's rival Yahoo has had a lead. Google dominates the search advertising industry but has struggled to break into other advertising areas, both online and off.
Microsoft had also been vying to purchase DoubleClick. A Microsoft spokeswoman declined to comment after the deal was announced on Friday afternoon.
"I think it was insanely smart for Google, and I think it is an Armageddon for Microsoft," said Bill Gossman, chief executive of Revenue Science, a platform for targeted advertising.
The deal is almost double the amount that Google paid for YouTube last year and is the largest in the Mountain View, Calif., Internet giant's history. A star of the dotcom era, DoubleClick set off a privacy firestorm when it announced in 2000 that it would merge data collected about online and offline purchases.
Following the dot-com bust, DoubleClick agreed to be acquired by Hellman & Friedman, an San Francisco-based private equity firm for $1.1 billion.
Analysts and other industry experts said Google's high bid made sense because of the size and quality of DoubleClick's customer base. DoubleClick's software is installed by top-tier publishers around the world to help them decide what ads to serve on their site and to help manage their advertising inventory.
Based in New York City, in the same building where Google has an office, DoubleClick has more than 1,500 customers. Its top competitors are aQuantive and 24/7 Real Media.
Gossman, whose company works closely with DoubleClick, said Microsoft lost a major opportunity to outflank Google by taking advantage of Google's weakness in display advertising and enterprise software sales.
Before the deal was announced, Google had been rumored to be developing a free ad-serving tool that it had hoped would compete with the product that was DoubleClick's bread and butter. Susan Wojcicki, vice president of product management, declined to confirm the rumor in an interview with the San Jose Mercury News on Friday.
In a conference call with analysts and reporters, Schmidt said Google decided to make a bid for DoubleClick after a strategic review revealed that the opportunity to sell display advertising was larger than Google's executives had previously imagined, and that DoubleClick had done an exceptional job at entering the market.
DoubleClick also recently announced a Nasday-style marketplace for online advertising to help publishers sell more of their inventory. Yahoo owns a 20 percent stake in Right Media, which operates a competing marketplace.
Tom Chavez, chief executive of Rapt, which also makes advertising software, said the deal will give Google valuable information about how ads perform on the Web sites of top publishers.
"Whoever controls the data has a leg up," Chavez said. "If there is any single one tension (created by the deal) it's going to be that." However, Chavez said publishers may feel that it is worth sharing their data with Google if it means that they can sell better-targeted, and higher-priced, advertising.
Wojcicki said the data would still belong to the publisher. "DoubleClick has specific policies in place right now in terms of how that data is managed and how it is used," Wojcicki said. "It is very important to us to continue to manage the data in a way that publishers are comfortable with."