Microsoft and DoubleClick: What if Redmond wanted to lose?

Microsoft and DoubleClick: What if Redmond wanted to lose?

Summary: What if Microsoft bluffed? What if the Microsoft didn't really want DoubleClick and simply wanted to bid up the price that Google had to pay to make its latest acquisition? I know I might sound like a Microsoft apologist trying to explain the DoubleClick loss. But think this through:

TOPICS: Microsoft

The pundits have spoken: Chalk up another win for Google and another loss for Microsoft in the bidding war for display-ad vendor DoubleClick.

Many industry watchers believe Google was wiling to pay a whopping $3.1 billion as much because of its desire to keep DoubleClick out of Microsoft's hands as for DoubleClick's customer and partner lists. And if you thought Microsoft was doomed before in the online advertising market, the Redmondians are really toast now thanks to the DoubleClick loss, some sages are claiming.

But what if Microsoft bluffed? What if the Microsoft didn't really want DoubleClick and simply wanted to bid up the price that Google had to pay to make its latest acquisition? I know I might sound like a Microsoft apologist trying to explain the DoubleClick loss. But think this through:

If you look at Microsoft's spending patterns, as of late, the company is leaning more toward doing less-than-$1-billion-sized acquisitions. In the increasingly rare cases when Microsoft does shell out big bucks (like close to $800 million for TellMe), it's because it envisions the target as a technology acquisition, not an advertising/customer acquisition. Did Microsoft view TellMe as more of a mobile-search purchase or a voice-technology buy? I'd bet the latter....

As Don Dodge, director of business development with Microsoft's Emerging Business Team, blogged:

"DoubleClick was a publicly traded company two years ago and valued at less than $1 billion. Anyone could have acquired DoubleClick, but a private equity firm took them private less than two years ago for $1.1 billion. They later sold off two divisions for $525 million. Yesterday Google paid $3.1 billion for what remained of DoubleClick. Why did Google wait two years and pay billions more?"

Sure, Dodge's reasoning could be nothing more than sour grapes... "Microsoft never really wanted 'em anyway!"

What do you think? Was DoubleClick a Microsoft bluff or a muff?

Topic: Microsoft


Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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  • It wouldn't be the first time

    Back in the day, when dBase was the hot commodity MS and Borland got in a buying mood.

    On the block were Ashton Tate and Fox Software. Ashton Tate made Dbase III and was just coming out with Dbase IV. Fox Software was just coming out with their first version of FoxPro for Windows (I remember this because I was a beta-tester).

    Dbase was far and away the front runner in terms of popularity and user base. FoxPro was far and away the technically superior platform, and was nearly 100% compatible with dBase III.

    MS made no secret of the fact they were hunting a database company. Borland, however, moved first. They bought Ashton-Tate for the install base. MS then purchased Fox Software.

    The industry thought Borland had pulled a coup on MS. But in buying Fox Software MS had made a *technology* purchase, a technology called Rushmore, a query optimizer that accelerated queries literally by a factor of 1000.

    And, as they say, the rest is history...

    Could be MS did the same thing with Double-click. :)

    Of course maybe they really wanted Double-click, but then again I am forcefully reminded of Borland.

    MS literally let Borland pick which company they wanted--and Borland got greedy for marketshare. So MS quietly, with a plate full of crow, bought the "second choice".

    I guess MS has a little Br'er Rabbit in their genes...
    • Yes, for Microsoft technology trumps market share...

      ... insofar as acquisitions and even strategy are concerned. The market share the company probably notices most consistently are 95% of operating systems and +- 90% of browsers.

      Of the potential advertising readers/viewers, whhat percentage are using a Microsoft browser on a Microsoft operating system?

      Admittedly, that's not a direct advantage over companies like Google or Yahoo, which are in the ad business rather than in the software business. And anti-trust restricts leveraging.

      But if any company can make a statement about exposure which cannot realistically be taken away and about the quality of the brand, it's Microsoft.

      I think Microsoft would do well to partner with Yahoo and others, but that observation has not been prescient in the past.
      Anton Philidor
  • Why?

    Between YouTube and Double Click I have to wonder if Google has any spending sense at all. They remind me a child who gets a bunch of money for Christmas and goes around buying all the shiniest biggest new toys. In a few weeks those toys will give way to even shinier toys, and then what?

    I love Google but I think their latest purchases are inflated by a factor of at least 3.
  • Microsoft didn't want to ruin another product

    They simply know they can't make good advertising program, no matter what.
    So why spend billions of $$$s just to bury it somewhere (as in your other post)?
  • Bluff

    Dont you think if Microsoft really [i]needed[/i] DoubleClick they would have gotten it?
    I guarantee that somewhere here in Redmond this weekend there were glasses
    clinking amidst chuckling... ;-)
  • It Doesn't Negate...

    ...the fundamentals: Revenue & Profit erosion at Microsoft during its a viable Internet player.
  • Microsoft's $8 Billion Problem

    It cost Microsoft 18.8? more to generate a dollar in sales than it cost Google. Multiply that 18.8? times its sales revenues and you find that Microsoft has an $8.3 billion dollar problem. That's how much the company was over-spending on enterprise marketing in 2006 compared with Google. The basic issue for Microsoft was the impact a DoubleClick acquisition might have had on correcting this fundamental problem. MSFT is stuck in the rut between software/servers (at Oracle's value/revenue multiple of 7) and gaming (at Nintendo?s v/r multiple of 4). Buying DC even at $4 billion could have put it on track to Google?s v/r multiple of 14 in the search/advertising space. I think this was not a bluff. But the real test will be whether or not MSFT goes after another target in the same space. Readers are invited to check out my analysis at
  • I don't see it as it matters a great deal to MS

    MS has a very broad financial investment infrastructure which really puts the issue of DoubleClick on a lower list of priorities.
    DoubleClick would have been a nice to acquire but it's importance is really not as big as getting Vista to meet the acceptable standards of the US government. When you have so many soldiers on such a large playing field you have to put your priorities in place to manage the overall big picture. MS stands to lose so much more than this bidding war if it doesn't look after the home front. Let's assume Redmond wanted to lose, what would they have to gain by it ? There are a lot of things going on in the business world of acquisitions and any input from anyone outside of them would be guessing at best. I really don't see it as a big deal lost when it comes to MS. I can see where it would mean more to Google and they may have been made to pay a higher price but it's not something that won't be recovered over time. From my viewpoint, the acquisition of DoubleClick is not anything I'd want to brag about due to it's questionable software practices. I see no big win or loss either way.