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Google Inc. continues to expand its empire. While its search engine has become the de facto choice for most Web surfers, the Mountain View, Calif.-based company has continually added complementary features like e-mail, shared applications, video sharing and photo albums, and it continues to look to delve into new complementary territory.
ADDING DOUBLE The online giant's latest conquest -- a $3.1 billion bid for online advertiser DoubleClick Inc. -- is awaiting regulatory approval. While Google waits for the green light for DoubleClick, the company has set its sights on China with an undisclosed investment in Chinese social networking service Tianya.cn on Aug. 20. Terms of the deal, including the size of Google's stake, were not disclosed. Google's deal for online advertiser DoubleClick Inc. on April 13 will be the company's largest ever -- if it passes regulatory muster -- following the $1.6 billion purchase of the top online video sharing site YouTube Inc. in October 2006. Google's acquisition of DoubleClick will give the company a large network of advertisers and Web publishers to serve and sell advertisements to. In addition, the deal is a shot in the arm to the search giant's banner advertising business, which lagged rival Yahoo! Inc.'s. What's also at the heart of the deal is the acquisition of a centralized platform that will give media agencies and advertisers the ability to manage integrated search and display ad campaigns. The addition puts Google closer to market leader Yahoo! in the online display ad sector, and temporarily gives it a leg up on Microsoft Corp. and, to a lesser extent, AOL LLC. To finance the deal, Google dipped into its huge cash position of $11.1 billion as of December 2006. Some worry that Google paid too hefty price for DoubleClick. Senior writer David Shabelman noted in a recent Deal article that based on analyst estimates, the company will look to pay more than 30 times DoubleClick's trailing Ebitda of $100 million. Meanwhile, DoubleClick's peers -- aQuantive Inc., ValueClick Inc. and 24/7 Real Media Inc. -- all traded at less than 15 times Ebitda before the DoubleClick deal was announced. And then a flurry of online advertising M&A erupted. AD WARS Within weeks:
A SWELL OF MOTION It seems the competition has only incentivized Google to more action. The search giant took PeakStream Inc., which makes software to accelerate the performance of computers, off the hands of its former venture backers Sequoia Capital and Kleiner Perkins Caufield & Byers for undisclosed terms on June 6, days after announcing a deal for Feedburner, a company that helps bloggers and podcasters syndicate and monetize their content, for a reported $100 million. The company has also struck deals that would broaden its offline reach including one arrangement with satellite television provider DirecTV Group Inc. to help it to generate advertising revenue. The company's strategies seem to have worked so far, as it reported April 19 it beat analysts' first-quarter expectations by a surprising 11.5% with earnings of $3.68 per share on net revenue of $2.53 billion. CEO Eric Schimdt's direction of the company was rewarded April 19, as well, as he was appointed chairman. On the online video front, Google leapfrogged its competitors by acquiring YouTube for $1.6 billion in stock. Google outbid Internet and media rivals for the online property but it remains to be seen if the acquisition was worth the hefty price. One downside is that large media companies are prohibiting their content from being posted on YouTube because of copyright issues. Viacom Inc. is suing Google for $1 billion to keep its programming off YouTube. The outcome of this case will certainly shape the future of online video sharing and the role YouTube will play in Google's strategy. Prior to the YouTube deal and its IPO, Google focused on M&A deals for smaller to midsized companies. With its August 2004 public offering, Google's stock rose 18% on its first day of trading, opening at $85 per share and closing at $100.33 apiece. The stock was sold via a Dutch Auction, where a sale of 19.6 million shares generated $1.67 billion, a more than adequate war chest for future acquisitions. Google has gone on to become one of Wall Street's most high-flying stocks, currently trading in the $475 range due to strong sales and earnings in the advertising market. --Gerald Magpily
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So as the dust settles on the recent acquisitions in the ad serving market, with WPP buying 24/7 Real Media, Google buying DoubleClick, Microsoft buying aQuantive, AOL buying AdTech and Yahoo buying Right Media – what has really happened?
The answer is that these acquisitions indicate that targeted rich media and display advertising is the way forward and that the tipping point has now been reached away from TV to the Web and mobile.
These acquistions are both protective and aggressive – giving WPP, Google, Microsoft, AOL and Yahoo the ability to place ads on sites other than its own, measure the effectiveness of these ads and also target advertising based on users search queries, surfing habits and response to advertisements - behavioral targeting is coming of age. With the addition of huge resources now being made available to what was once was an ad serving cottage industry, one can assume rapid innovation and development.
Some consumer and privacy groups say the growing ability to collect information online is eroding privacy. Companies such as Google, Microsoft and Yahoo already collect data about users through their e-mail accounts, search queries and online calendars. Will these companies combine their data with the cookie and click stream analysis gathered by their new acquired ad serving firms to create detailed profiles on users Internet and search interests. The companies say that the data is anonymous and that users have the ability to opt out of having data collected about them, though privacy experts say that few people know they have that option, the advertisers also say that behavioral targeting will benefit consumers as it will target relevant advertising and not irrelevant junk to them, so giving the web user a better service.
An example of this is a consumer thinking of buying a car and visiting Yahoo Autos and looking at a Range Rover sport-utility vehicle, when the consumer leaves the page, checks Yahoo e-mail, Yahoo Sports and Yahoo stock quotes and logs off, these visits are tracked by a cookie. The next time the consumer is back on Yahoo Sports, Yahoo's proprietary behavioral-targeting platform can serve an ad for the SUV on that site. What ad serving companies do is segment their Web site partners' audiences into categories of users like car buyers, mountain bike enthusiasts, wine buffs, new mothers and then segment further, based on geography, sex and other criteria.
However what they lack is the ability to analyse and understand the actual financial position of a consumer, imagine the advantage of knowing if an online user has a good credit rating, is a homeowner, buys a new car every 3 years and currently has a 2 year old Volvo S80 estate, goes on 2 foreign holidays a year, has 2 children, buys goods regularly online, travels regularly between London and Paris, is an architect and earns over $100k per year.
Perhaps the next stage of behavioral targeting is to integrate consumer credit and marketing information. Experian maintains more detailed information about consumers than any single competitor in the information industry and operate 14 consumer credit bureaux and seven business credit bureaux around the world, with information on approximately 300 million consumers and 30 million businesses. They also compile and manage data on the histories of 600 million vehicles in the US and the UK, on 30 million insurance policies in the UK, on the catalogue purchasing habits of 110 million households in the US and consumer marketing information in respect of 130 million households globally.
So to gain competitive advantage, who will buy Experian? Will it be WPP, Google, Microsoft, AOL or Yahoo?