Travelling Soldier

Google buys out the grand daddy of online advertising,DoubleClick- which is known for placing display advertising on multiple websites,a business that google is just getting started in. In last term of MBA,I worked on Google’s business strategy focusing on advertising business and concluded how google should make moves for it survival and dominance. Acquiring other advertising firms was one of the recommendations.

This acquisition will help Google to compete with Yahoo,AOL,Microsoft more fiercely. Microsoft was also in the race to buy DoubleClick but I think they couldnt make the best deal for DoubleClick. Google has offered $3.1 billion,a mere 2% of its 145 billion market cap,to Doubleclick. This amount is almost double to what it paid to acquire Youtube.

Google is becoming like an operating system for placing banner ads and is a major step in reaching the strategic objectives of Google i.e., transforming itself (search engine) into advertising powerhouse. Doubleclick notonly bring great advertising software but brings in relationships with Webpublishers,advertisers and ad agencies.

“This merger is really a part of a global growth strategy for Google,” Eric E. Schmidt, Google’s chief executive, said in a conference call. Mr. Schmidt said that being able to kick-start Google’s display advertising business and marry it with search advertising was the most compelling reason for the purchase. Keeping Microsoft away from Doubleclick and advertising business will be worth more billions than what google is offering doubleclikc and other ad startups.

A highflying stock in the late 1990s, DoubleClick was an early pioneer in online advertising and was one of the few online ad companies to survive the burst of the dot-com bubble. In 2005, it was taken private by two private equity firms, Hellman & Friedman and JMI Equity, in a deal valued at $1.1 billion.

Since then, the company has sold two data and e-mail advertising businesses and acquired Klipmart, which specializes in online video. DoubleClick generated about $300 million in revenue and $50 million in earnings before interest, depreciation and taxes last year, mostly from providing ads on Web sites.