Google closes deal with ad firm
Internet giant Google is a much stronger force in the online advertising market thanks to its $3.1 billion acquisition of online advertising firm DoubleClick, which closed Tuesday.
The European Union gave its blessing to the merger Tuesday. Google quickly followed by finalizing the deal. Google, which dominates text-based search advertising, now gains access to display marketers, the expertise of chief rival Yahoo.
Yahoo is the target of an unsolicited takeover bid by Microsoft, the No. 3 player in the online advertising space. The Google-DoubleClick alliance puts pressure on Microsoft to close its acquisition of Yahoo, says analyst Greg Sterling of Sterling Market Intelligence.
"Microsoft taking over Yahoo is now all but inevitable," says Sterling. "I don't think Yahoo has any other options. And now we'll have two companies (Google and Microsoft/Yahoo) with enormous assets duking it out in the display space."
Investment firm JPMorgan says the display market will reach $28.6 billion by 2010, from $20.8 billion this year.
Google's DoubleClick acquisition had been opposed by Microsoft and Yahoo, but the EU said the purchase "would be unlikely to have harmful effects on consumers." U.S. regulators approved the merger in December.
A recent report from market tracker ComScore Media Metrix suggesting a decline in the effectiveness of search ads spooked investors.
Google's stock price has plummeted from its Nov. 6 peak close of $741.79 a share. Investors pushed the stock up 6 percent an Tuesday, to $439.84 a share.
Getting the green light into the display advertising market "couldn't have come at a better time for Google," says Chris Winfield, president of 10e20, a New York-based firm that plans search marketing campaigns for businesses.
Over the next few weeks, Mountain View, Calif.-based Google will integrate New York-based DoubleClick into its business and determine staffing levels and responsibilities, Google CEO Eric Schmidt wrote in a posting at Google's company blog.
He said he expected some job cuts, more in the United States than overseas.
Winfield expects Google to weave DoubleClick into its existing self-serve advertising tools, which enable businesses large and small to create and submit ad campaigns online without the assistance of a salesperson.
"Yahoo may be the leader in display now, but if Google can make it much easier for anyone to launch a display ad campaign, they sew up the business," he says.
WBJ Web Partners
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