Like the stars of the old Japanese monster flick, Godzilla v. King Kong (1962), Microsoft and Google have been engaging in an increasingly titanic battle for strategic advantage on the Internet. The latest rumble is over the primary fuel source for the Web, online advertising.
Last week, the Wall Street Journal reported the current owner of DoubleClick, the private equity firm Hellman & Friedman, is interested in selling the online ad server, and that one of the leading contenders is the Redmond-based Microsoft. Hellman & Friedman purchased DoubleClick for $1.1 billion in 2005, and has reportedly slapped a $2 billion price tag on the ad company.
Just a few days after breaking the news of DoubleClick's potential sale, the Journal ran a follow-up story that said that Google is now considering a bid for DoubleClick. If accurate, the news of Google's interest sets up the possibility of a potentially expensive bidding war with its Redmond rival. But with cash on hand of $26 and $11.2 billion, respectively, neither Microsoft nor Google will have to dig change out of the CEO's couch if either company decides to augment its ad portfolio.
Is DoubleClick Worth It?
Shar van Boskirk, a senior analyst for Forrester Research, said that she was not surprised by the competition for DoubleClick. "Over the last year," she said, "we've watched the big three online media companies -- Microsoft, Yahoo, and Google -- introduce a variety of different tools for marketing professionals. DoubleClick would round out their focus. If you're looking to put together a suite of resources for marketers, why not go after the top-branded name in the advertising space?"
There has been some question in the trade press about whether Hellman & Friedman has overpriced DoubleClick, which generates approximately $150 million in revenues. That might not particularly trouble Google, which recently parted with $1.65 billion to purchase YouTube, a high-profile but revenue-free video sharing site.
Underlying the interest in DoubleClick is the increasingly important role of online advertising in Internet commerce in general. The online advertising research firm eMarketer.com estimates that by 2010, spending on online advertising will top $32 billion.
Microsoft the Winner?
Beyond the general revenue possibilities associated with DoubleClick, the ad serving company could fit in nicely with the business plans for both Microsoft and Google. Purchasing DoubleClick could help Microsoft by boosting its AdCenter program, which currently lags well behind Google's AdSense. For Google, the acquisition of DoubleClick could effectively freeze Microsoft out of the ad market for small to medium-sized businesses.
Van Boskirk predicted that in the end, Microsoft would wind up the victor in the DoubleClick sweepstakes. "I don't think that Google is actually all that interested in Doubleclick," she said. "They've got the same general goals as Microsoft in terms of the services they want to be able to offer, but the culture at Google is much more strongly oriented toward developing and implementing their own technology."
"I talked to some people at DoubleClick yesterday," van Boskirk added, "and they're moving more aggressively on some product launches than they were planning to do. I'm not sure if that's related to the proposed sale, but I do think it will be soon, because the timing seems so good."