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Google agrees to purchase web advertising company in cash

Google, Inc. announced today a definitive agreement to buy DoubleClick, Inc., an online advertising company, for a sum of $3.1 billion in cash.   The web search giant is acquiring the advertising company from San Francisco-based private equity firm, Hellman & Friedman along with JMI Equity and management. 

According to the press release, "the acquisition will combine DoubleClick's expertise in ad management technology for media buyers and sellers with Google's leading advertising platform and publisher monetization services."

Google says the combination of the companies will enhance targeting, serving and analyzing online ads of all types, benefiting consumers by:

  • For users, the combined company will deliver an improved experience on the web, by increasing the relevancy and the quality of the ads they see.
  • For online publishers, the combination provides access to new advertisers, which creates a powerful opportunity to monetize their inventory more efficiently.
  • For agencies and advertisers, Google and DoubleClick will provide an easy and efficient way to manage both search and display ads in one place. They will be able to optimize their ad spending across different online media using a common set of metrics.

"This transaction will strengthen our advertising network by expanding our access to publisher inventory and enabling us to serve the needs of a broader set of advertisers and ad agencies," said Tim Armstrong, Google's President, Advertising and Commerce, North America.

Google and DoubleClick have both approved the transaction, which is expected to close by the end of the year.  Speculation of the sale began several months ago when reports surfaced that a $2 billion dollar deal was in the works.



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RE: Missing details...
By masher2 (blog) on 4/14/2007 1:43:37 PM , Rating: 4
> "...it will take Google over 20 years to pay it off."

Worse than that, as sales don't equal profit.

> "What details are we missing here? "

Growth primarily. Google is assuming an extremely high growth rate in that sales figure. Personally, I think they're still being a bit optimistic as to its net worth, but still, decent growth will cut the payback period dramatically.


RE: Missing details...
By iNGEN on 4/14/2007 4:28:19 PM , Rating: 4
Also do not forget the strategic value of denial. Certain assets have an opportunity cost associated with permitting their acquisition by a competitor. I believe that is the case here. Double-click's preeminence in the digital advertising market makes it one hell of a target for anyone who would wish to cut into Google's marketshare.

Schmidt, Reyes, and Drummond were on-point with this buy. They did not overpay, you'll see.


RE: Missing details...
By masher2 (blog) on 4/15/2007 2:22:30 PM , Rating: 2
> "Also do not forget the strategic value of denial"

A good point. Even if Google fails to show a profit directly from the purchase, they've denied their competitors the most obvious means of attacking their market share.

Honestly, had Google purchased this with $3.1B in stock, I would have considered it a very good deal for them. It just shocked me they used cash, rather than making good use of their current share prices.


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