Yesterday, I chided Google for its heretofore philosophy of not wanting to pay up in acquisitions, the “crazy” buy-out model espoused by Google’s corporate development strategist Salman Ullah.
But Google HAS bit the bullet, big time today, agreeing to acquire DoubleClick for $3.1 billion cash.
(Despite CEO Eric Schmidt telling Wall Street--via Mary Meeker at the Morgan Stanley Technology Conference last month--that no worry, Google would not be seeking big mergers or making other dramatic changes in how the company uses its cash.
Schmidt was asked whether Google would consider changing course on how it uses cash. "It is highly unlikely," Schmidt said. "One of the problems in high-tech industries is that successful companies tend to generate cash pretty liberally (but) they don't have good places to put it…He added that, while Google itself is generating a mounting pile of cash, "it is not obvious to me where it would go.”)
Why is frugal Google opening up the very large purse strings for DoubleClick, paying $3.1 billion in cash upfront for a Web 1.0 banner ad serving firm which generated approximately $300 million in revenues last year?
Google WILL BE a monopoly, I said earlier:
Although Google reigns supreme in the category it catapulted to online advertising fame—PPC text ads—it has not achieved similar success with “image ad” serving.
The acquisition of a dedicated banner ad serving firm such as DoubleClick, with its established clientele, would complete a virtuous circle of powered by Google online advertising:
Pay For Performance Text Ads,
Pay For Action Referral Ads,
Pay For Delivery Display Ads!
All on the same (Web) page and on all of the Web’s pages, Googley monopoly style!
Is it that easy though? Is a $3.1 billion check all it takes for Google to tighten its control over the Web’s advertising, no questions asked?
Not exactly. In Google’s big, bad risk earlier this week I analyzed the inexorable conflicts that Google’s real desire to be the Web’s advertising gatekeeper breeds.
The New York Times suggests same in announcing the DoubleClick deal:
The Google DoubleClick marriage will be risky, but Google is more likely to successfully finesse the integration of an online advertising firm into its business model, than it has been able to do following its stock acquisition of video hosting site YouTube and its earn-out buy-out of radio technology service dMarc Broadcasting.
The sale raises questions about how Google will manage its existing business and that of the new DoubleClick unit while avoiding conflicts of interest. If DoubleClick’s existing clients start to feel that Google is using DoubleClick’s relationships to further its own ad network, some Web publishers or advertisers might jump ship.
dMarc Broadcasting, YouTube, DoubleClick…? Google finally ponied up to make a serious acquisition in the DoubleClick transaction.
Not surprisingly, a serious deal yields serious opportunity!
ALSO: Google DoubleClick merger: Who wins, who loses and Google hurts Yahoo with DoubleClick deal and Google to tag users across Web: Privacy Boomerang? and Microsoft vs. Google: Will MSN, Windows Live compete?