Google Pays Premium for DoubleClick

123jump.com Staff
13 Apr, 2007
New York City

Google has agreed to pay $3.1 billion in cash to purchase Internet advertising agency DoubleClick. The premium price paid by Google shows its increasing willingess to protect its turf from its rival Microfot and Yahoo at any cost. This is the third deal Google has signed less than three years at a price more than $1 billion.

Google Inc has agreed to pay top dollar price of $3.1 billion in cash for an Internet advertising agency DoubleClick today.

The largest acquisition to date by Google ((GOOG)) marks its increasing willingness to pay above market price for companies. In the last two years Google has been involved in deals worth more than one billion dollars that appear to protect its business turf from competitors such as Microsoft and Yahoo.

Google paid for $1.65 billion for online video sharing site YouTube and also invested $1 billion in Time Warner to lock advertising deal for AOL network of sites. The today’s purchase of DoubleClick brings thousands of advertising relationships to the company in serving display ads. Google has been working on ad serving solution and was expected to release display ad serving system in the coming months.

The deal marks a windfall profit for Hellman & Friedman. The private equity boutique paid $1.1 billion in 2005. Since then DoubleClick has sold its email marketing division for $90 million and its data management and analysis unit was purchased by Alliance Data Systems for $430 million. DoubleClick is reported to have revenue of less than $152 million.

The global Internet advertising market has been growing at more than 35% but a large share this revenue is in the U.S.A. The search based advertising revenue is expected to cross 70% of total online ad revenue of $29 billion in the year 2007. Total Internet based advertising is still less than 10% of the total advertising in the U.S., but it is the fastest growing channel. While TV, print and outdoor ad sales are stalling or declining, keyword based search ads are increasingly embraced by large advertisers. Classified ads and job postings have migrated to the Internet at a rapid pace in the last three years.

Google has increasingly looked for ways to broker ads not only on the Internet, but in print, on TV and in other channels. DoubleClick inserts ads from many advertisers in the real time mode across thousands of web sites in its widely known network known as DART.

Microsoft appears to be falling behind in its efforts to launch its search site. Yahoo, the distant second player in the search market has also been losing market share to Google. According to some private estimates Google is expected to report an increase in its search leadership edge with a market share of more than 83% when it reports its earnings on April 19th.

Yahoo, Microsoft and Google sought to acquire DoubleClick but only Google was ready to pay top dollar for the network of relationship that the company has. The sale of the company is another landmark in its history. DoubleClick went public in 1998 and reached its peak price of $134 in the year 2000 and never managed to recover. The stock traded to a low of $4.50 in the next two years before being taken private. After the deal news, Google fell $3.50 or less than 1% in the after-market trading on Friday.