by Robert Hof
The official marriage of search- and display-ad titans Google and DoubleClick may take a while to pay off, but it deals a blow to Microsoft now
The long-awaited completion of Google's $3.1 billion purchase of DoubleClick will kick off a new online advertising battle that may rage for years to come. Yet it may also take years for the search giant to gain a foothold in what's shaping up as the next front in the $20 billion online ad industry: the resurgence of display ads, those colorful but oft-ignored "banners" and videos that run along the tops and sides of Web pages.
On Mar. 11 the European Commission blessed the deal with no restrictions despite opposition from rivals and privacy advocates worried about one company having too much data about people's online activities. The green light from the European Union's executive arm came nearly three months after the U.S. Federal Trade Commission gave its go-ahead and nearly a year after the deal was first announced.
With the final regulatory hurdle removed, Google closed the deal immediately, taking over the company that places billions of ads per day on thousands of Web sites worldwide—further concentrating the online ad industry into fewer powerful hands. Google (GOOG), Yahoo! (YHOO), Microsoft (MSFT), and Time Warner's (TWX) AOL have spent billions to snap up a variety of ad companies in the past year or so.
Targeting for Banner Ads, Too
Google's purchase of DoubleClick joins two ends of the online ad spectrum at a critical time. Search ads, those columns of tiny text that run alongside Internet search results, have come to dominate the industry's growth as Google has perfected its technology for targeting the right users with the right ads. That shift has come at the expense of display ads, whose share of the online market has fallen from 58% in 2001 to just 21% today.
But new technologies are starting to offer the same kind of targeting potential for banner and video ads as well. And with more users switching the focal point of their Web surfing from search engines to social networks such as MySpace and Facebook, banners and boxes may gain new appeal among advertisers. "We're in the midst of the third chapter of online advertising, and it's all about display ads," says Paul Levine, vice-president for marketing at ad network AdBrite.
The DoubleClick purchase will deal a double whammy to Microsoft. More than ever, the software giant will be pressured to prevail in its unsolicited $45 billion bid to buy Yahoo, the acknowledged leader in online display advertising. And Microsoft's struggle to wrestle that deal to the ground—which could last until Yahoo's next board meeting, possibly not until June or July—will distract the two Google rivals for months. That will give Google precious time to integrate DoubleClick into its business.
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