Google beats Microsoft with DoubleClick

Google has agreed to its largest acquisition, reaching a deal to purchase online advertising company DoubleClick, from two private equity firms for $3.1 billion in cash, almost double what it paid for YouTube last year. And perhaps just as important, the deal kept DoubleClick from the hands of Microsoft. For Google, the purchase is yet another step in its transformation from a search engine to an advertising powerhouse. New York City-based DoubleClick specialises in software for display advertising and has close links with Web publishers, advertisers and advertising agencies. “It’s the two juggernauts in search and display getting together,” said Martin Reidy, president of Modem Media, an ad agency in the Publicis Groupe. For computer users, the deal could mean more advertising tailored to their online habits, especially if DoubleClick and Google combine some of their huge databases of information on Internet use to direct specific ads to different Web surfers’ tastes. “This merger is really a part of a global growth strategy for Google,” Google chief executive Eric E Schmidt said in a conference call. Being able to kick-start Google’s display advertising business and marry it with search advertising is the most compelling reason for the buy.

The deal involved weeks of negotiation, which included at one point Yahoo, AOL and, most prominently, Microsoft, which has been trying to position itself as an advertising rival to Google. Even though Microsoft has more cash on hand than Google, the company was ultimately outbid.

“Keeping Microsoft away from DoubleClick is worth billions to Google,” said RBC Capital Markets analyst Jordan Rohan. “Yet again, Microsoft is on the sidelines and away from the action.” The acquisition will strengthen Google’s position with respect to Yahoo, its chief rival in Internet search and advertising and a leader in the sale of display ads. DoubleClick is the most prominent ad serving firm on the Web, meaning that it delivers display ads from ad agencies to the sites where they are run.

–L STORY & M HELFT