/ 14 March 2008

Google has DoubleClick in the bag

Google expanded its power in online advertising on Tuesday when it completed its takeover of DoubleClick, a move that increases the pressure on rival Microsoft to win its hostile bid for Yahoo!.

The merger of the world’s top online search firm with the industry leader in matching ads to people’s internet activities came after European regulators signed off on the deal, and strengthened Google’s domination of the lucrative online ad business.

”We are thrilled that our acquisition of DoubleClick has closed,” Google chairperson and chief executive Eric Schmidt said in a written statement shortly after European antitrust regulators cleared the deal. ”Google now has the leading display ad platform.”

The European Commission said an investigation opened in November last year concluded that the transaction ”would be unlikely to have harmful effects on consumers”. United States regulators approved the deal last year.

Google ended a bidding war with Microsoft in April last year by agreeing to pay $3,1-billion to add DoubleClick to its internet money-making arsenal.

”It’s part of Google’s desire to control most of the online ad revenue,” said analyst Rob Enderle of Enderle Group in Silicon Valley. ”Google is trying to become a one-stop shop for ads.”

Google’s purchase of DoubleClick is likely among the reasons Microsoft is now trying to buy Yahoo! for $44,6-billion in cash and stock, analysts said.

Microsoft opposed Google’s purchase of DoubleClick, and says it wants to combine resources with Yahoo! to battle Google’s dominance on the internet.

”It is hard to see how Microsoft’s original acquisition effort or idea was not somehow predicated on the belief Google would acquire DoubleClick,” Cantor Fitzgerald analyst Derek Brown said. ”It doesn’t seem to be a wild card in the equation.”

Yahoo!’s board of directors rejected Microsoft’s February 1 offer, saying it undervalues the California company.

Microsoft is reportedly scheming to replace the incumbents with board members that would approve the takeover.

”Google owning DoubleClick does increase the pressure on Microsoft to close the deal with Yahoo!, absolutely,” Enderle said.

DoubleClick ”is the most powerful company in its space”, using online behaviour tracking to target people with online ads, according to Enderle.

In a practice common in the industry, DoubleClick installs software bits referred to as ”cookies” on internet users’ computers to track pages they view.

Google, meanwhile, stores its users’ search terms in a way that can identify them through their internet protocol address.

Privacy advocates fear that Google and DoubleClick would be able to merge their expansive databases in a way that allows the company to further track people’s internet activities.

Regulators on both sides of the Atlantic said they did not take into account the impact on privacy of the takeover because they are legally required to focus on competition.

In December, US Federal Trade Commission (FTC) members voted 4-1 to refrain from blocking the deal and said Google and DoubleClick ”are not direct competitors in any relevant antitrust market”.

The panel expressed concern about the privacy implications of the tie-up but said that could not be considered in its review.

”The FTC lacks the legal authority to block the transaction on grounds, or require conditions to this transaction, that do not relate to antitrust,” the FTC said.

But the agency said it released a set of proposed marketing principles at the same time to address privacy and added that it would ”closely watch” Google. — Sapa-AFP