Why Microsoft should buy DoubleClick

Why Microsoft should buy DoubleClick

Summary: Microsoft is reportedly one of the suitors for online advertising network DoubleClick. As reported on WSJ.

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TOPICS: Microsoft
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Microsoft is reportedly one of the suitors for online advertising network DoubleClick.

As reported on WSJ.com, DoubleClick's owner--private equity firm Hellman & Friedman--is looking to cash out for roughly $2 billion. The firm acquired DoubleClick in 2005 for $1.1 billion.

There are plenty of options for DoubleClick and it could go public again, but a Microsoft purchase would be intriguing.

Here's why:

  • DoubleClick, which serves ads and tracks them, would bolster Microsoft's Adcenter, which is lagging behind both Google and Yahoo. With DoubleClick, Microsoft would have a suite of advertising services and software. And we all know how Microsoft just loves suites.
  • DoubleClick would give Microsoft a big chunk of the online advertising market. Redmond's biggest worry is that the software industry will move to ad-supported applications and leave it in the dust. With DoubleClick, Microsoft would at least capture some chunk of the online advertising market.
  • DoubleClick would bolster Microsoft's management ranks. Why is Microsoft so far behind in online advertising? It doesn't have the expertise that Google and Yahoo have. DoubleClick could change that a bit--assuming managers stayed with Microsoft of course.
  • DoubleClick needs a partner. The Journal is reporting that Google will announce a DoubleClick-ish service in upcoming weeks. If you're DoubleClick and that oncoming train is Google why wouldn't you find a big brother like Microsoft?

It's unclear whether Microsoft would pull the trigger on a big deal, but it may add up. Consider the options for Microsoft. It could buy Yahoo in an expensive deal. It could continue to invest in online services that aren't getting traction. Or it could take the middle ground, which would be acquiring DoubleClick. 

AG Edwards analyst Kevin Buttigieg sums up the situation in a research note:

"DoubleClick provides a web-publishing platform for Internet ads that we believe would provide a boost to Microsoft's online services ambitions which have so far been lackluster. According to the (WSJ) article DoubleClick is seeking at least a $2 billion valuation and has about $150 million in annual revenues. This would be far less a purchase of Yahoo! by Microsoft which has been long rumored and feared by investors, though Yahoo! has a much broader portfolio that DoubleClick."

Topic: Microsoft

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4 comments
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  • Sounds good to me

    Cuts down on my filter ruleset -- both of them get their packets dropped at the same time.

    The amount of spam that I get from Microsoft and DoubleClick isn't as high a percentage as it used to be, but the rules still get hits. I'll give them this: they don't run botnets.

    Hmmm -- now [b]there's[/b] a thought for Microsoft to get into the online advertising business big time. One MSWindows update cycle and they could have the biggest botnet ever. Best of all, they'd already have the users' permissions so it'd be legal.
    Yagotta B. Kidding
  • Does any web user like doubleclick?

    Doubleclick is always on my block list. Their ads are often irritating and distracting. Microsoft acquiring DC would be a match made for each other. They are both obnonxious.
    kraterz
    • Luckily we aren't all as ignorant/ungrateful

      Tens of millions of users like the web sites that are paid for with ads, served and managed using DoubleClick tools. DoubleClick doesn't produce the ads, or have anything to do with which ones run on any site that they serve on; they provide tools that hundreds of major publishers and agencies use to run those ads.
      hoopla-pdx
  • Good strategic fit, but the price is way out of line

    Larry, Very good analysis. I agree that DoubleClick could be a good strategic fit, but at $2 Billion it makes no sense. There is of course a price where it makes sense...and that is what negotiations are all about.

    Microsoft is more likely to acquire 25 companies for $40M each than to acquire one company for $1B. It is much easier to integrate small companies, find synergies, and create value. Billion dollar investments are harder and carry enormous risk.

    Last year I wrote a blog about the worst Internet Billion dollar acquisitions of all time. It was a sad tale. I tried to write another post on the best billion dollar acquisitions...but I couldn't thik of more than one or two.

    I wrote a blog today on why I think Microsoft should double think an acquisition of DoubleClick. See http://dondodge.typepad.com/the_next_big_thing/2007/03/should_microsof.html
    DonDodge