Google said on Friday it would pay $3.1 billion for Web ad
supplier DoubleClick Inc., its biggest acquisition,
accelerating a push into the graphic ad market led by Yahoo.
The juggernaut of Web search-based advertising beat out
suitors Microsoft and Yahoo in the final stages, sources
familiar with the negotiations said. Time Warner's AOL
online unit had earlier considered a bid.
The agreed price represents a huge payday for San Francisco
private equity firm Hellman & Friedman, DoubleClick's
majority owner, which 21 months ago paid $335 million for
the assets acquired by Google.
The purchase propels Google deeper into the Web display ad
market, which includes richer graphic and online banner ads
for corporate brands, and represents half of all online
marketing. Until now, this business has been dominated by
rival Yahoo.
New York-based DoubleClick would also fortify Google with
ad-targeting and analysis capabilities as the company
expands into print, radio, video, mobile and television ad
markets.
"The DoubleClick platform touches so many of the existing
Google customers," Google Chief Executive Eric Schmidt said
on a conference call. "It accelerates our entry into some of
these markets by several years."
Schmidt said Google had eyed up DoubleClick for years and
that employees of Google and DoubleClick already
collaborate. Highlighting their closeness, the companies
share a block-long office building in New York's former
meat-packing district.
The all-cash deal, coming just six months after Google paid
$1.65 billion for video-sharing site YouTube, is due to
close by year-end, once it has the necessary regulatory
approvals.
Founded in 1996, DoubleClick offers a digital marketplace
that connects ad agencies, marketers and Web site
publishers. It has more than 1,500 corporate clients.
DoubleClick came under fire several years ago from consumer
advocacy groups that accused it of planting software known
as "cookies" on users' computers to record what people were
viewing online. The company was targeted for investigation
by attorneys general in 10 US states. It negotiated a
settlement in 2002 that included being more open about what
data it keeps and removing the information from the Internet
within three months of its collection.
Some analysts felt Google paid a steep price for
DoubleClick. By contrast one of the top publicly traded
online ad firms, aQuantive Inc. , has a market value of $2.2
billion.
The Wall Street Journal said last week Microsoft pulled back
once the DoubleClick auction price topped $2 billion.
The deal comes as Yahoo has made more headway into Google's
core market. This week it signed a deal to supply search ads
to media conglomerate Viacom . Two months ago, it reached a
deal with NBC Universal to expand an existing ad partnership
with iVillage to cover all NBC Universal online properties.
However, Internet and media rivals to Google, fearing an
unprecedented consolidation of power in the online
advertising market, are expected to urge regulators to
closely scrutinize Google's deal to buy DoubleClick.
Microsoft said the deal would allow Google to corner the
online advertising market and provide them access to a huge
amount of information on consumer behavior on the Internet. Brad Smith, Senior Vice President and General Counsel, Microsoft, released the following statement on the proposed acquisition of DoubleClick by Google:
"This proposed acquisition raises serious competition and privacy concerns in that it gives the Google DoubleClick combination unprecedented control in the delivery of online advertising, and access to a huge amount of consumer information by tracking what customers do online. We think this merger deserves close scrutiny from regulatory authorities to ensure a competitive online advertising market."