InsideGoogle

Google Says, “We Gots Money, Lets Buy Everybody!”

So, Google bought DoubleClick.

For $3.1 billion in cash.

Jeez.

Google’s crazy.

So, Google has bought the New York-based DoubleClick, a 12-year old mature internet advertising company. DoubleClick has a number of products, including the DART platform, enabling ad agencies and media companies to sell advertising and track the performance of their ads. While Google runs all of its advertising, DoubleClick helps companies roll their own, and track the people who view those ads. MarketingVox calls it a virtual monopoly, Google buying relationships with online publishers and ad agencies, adding a second ad juggernaut to its own.

So, let’s see. Valleywag ran a chart of the big recent internet acquisitions. I’ve added in Google’s purchase of dMarc, (which was supposed to cost $1.1 billion till Google screwed it up), and Google’s $1 billion purchase of 5% of AOL:

Google is not afraid to spend money, in ways nobody has the guts to do lately. Google has spent almost six billion dollars now on DoubleClick, YouTube and AOL in 17 months, and they’re either crazy, or scarilly competitive. The last time a company was this competitive, they eventually became known as “evil” to an amazing degree. Looks like Google doesn’t care about evil anymore.

Microsoft had been rumored as the buyer of DoubeClick, for around $2 billion, so it looks like Google got entered in a bidding war and fought hard to win it. John Battelle* had said that there was no way Google was buying DoubleClick, and was just trying to bid it up against Microsoft. He also said he’d eat his post, and now says he will.

Paul Kedrosky says that the obscene price, over 30 times revenue ($100 million in 2006, maybe $230 million this year) is “a brazen attempt to cut off Microsoft’s future air supply”. It’s the most aggressive move I’ve ever seen Google make, putting their money where their balls are (so to speak), proving they are willing to play serious hardball to prevent anyone from being competitive. If you do decently well selling ads, they’ll buy you. If you want to spend to do well, they’ll buy anyone you try to buy.

Damn.

Randy jokes that, despite the rumors, Google didn’t buy him. Philipp jokes that Google has acquired the entire internet. Watch out, man.

* - It’s worth noting, and that’s exactly what Ionut did, that John’s book, The Search, had this to say about DoubleClick (emphasis mine):

There was always the failback of simply running banners on Google’s prodigious traffic — one deal with DoubleClick, an ad network that specialized in serving graphical banners, would probably net the company millions of dollars. But that felt like a sellout — DoubleClick’s ads were often gaudy and irrelevant. They represented everything Page and Brin felt was wrong with the Internet “They didn’t want to turn the Web site into the online version of Forty-second Street,” recalls investor and director Michael Moritz.

And this:

Despite the rise of Bill Gross’s GoTo.corn and it’s pay-per click model. in early 2000 CPM was still the dominant business model for most types of advertising—including DoubleClick’s. The distinctions Google’s founders insisted on—that the ads be text only, and that they be targeted ar a searcher’s query—represented something of a last strand before Google fell back to the more familiar turf of Forty-second Street. “Our theory was, well, we’ll try this for a little while,” Brin says. recalling how he and Page made the decision to try targeted text ads. “But if we start to see that we’re running out of money. well then we’ll just turn on a deal with DoubleClick, and we’ll be fine because we have a lot of traffic. Brin and Page were idealistic, to be sure, bur not to the point of suicide.

And finally:

Turns out the ads worked well enough. but they didn’t scale. Revenue was limited by Kordesrani’s abiliry to sell, and despite his talents, it was diflicult to book enough orders to create a healthy business. “It didn’t generate much money,” Brin recalls, referring to the program as a “hand-patched life preserver.” DoubleClick, he adds, was the ocean liner Google would swim to should the life preserver fail.

As spring 2000 approached, it looked increasingly likely that Google would have to swim for ir. But fate intervened: in March, the NASDAQ market crashed. Over the next few quarters. it continued what became a historic slide. Cash-rich rechnology compainies began slushing their marketing spend. and their mainstream counterparts immediately followed suit. By the end of the year, advertising revenues across the media business hud plummeted. In this environment, nor only were customers for Google’s new text-based advertising system few and far between: the notion thar DoubleClick could somehow save the company was also called seriously into question. By the end of 2000, DoubleClick’s stock had plummetted from a high of nearly $150 to a low of around $15.

“We always thought we could swim to the boat,” Brin recalls with a laugh. “But there was no boat!”

Had the bubble not burst, Google might have adopted a more traditional approach to Internet advertising. But the crash of the banner advertising market and the meager revenues from Google’s first attempt at text advertising led Brin and Page to turn their gaze toward GoTo.com. And as little as they might like to admit it, they saw salvation in Gross’s approach.

So, without DoubleClick, ironically, Google would not be where it is today. And for almost double the value of Google’s 2004 IPO, they’ve now bought the company that was supposed to be its safety net! Crazy world we live in.

Philipp notes that DoubleClick has a reputation as a company you have to be worried about when it comes to privacy.

April 15th, 2007 Posted by Nathan Weinberg | Advertising, General | 4 comments