Google vs. Microsoft: Vying for DoubleClick

Poised to launch a new ad exchange, the online ad company has plenty to offer the winner in the latest contest between these tech titans

by Catherine Holahan

Google and Microsoft are squaring off in a fight for the online ad outfit DoubleClick that shows Internet advertising is moving far beyond search. The three leading search engines—Google (GOOG), Yahoo! (YHOO), and Microsoft (MSFT)—are competing to become one-stop shops for companies that want to advertise across the Web. To achieve that goal, Net players need more than a ton of traffic on their own online properties and the ability to match up tiny text ads to search queries. They also need to sell ads on popular Web sites beyond their borders and obtain more user information.

That's where DoubleClick comes in. The real value of the New York company lies in its ability to place banner ads and video ads on Web sites scattered across the Net and then track the people who look at them. The firm has more than 1,500 clients, including major online publishers such as Time Warner's (TWX) AOL and News Corp. (NWS), owner of the popular MySpace site. "DoubleClick already has thousands of relationships with top-quality publishers around the world, and that is something that I don't think Google or Yahoo or Microsoft could have unless they spent years and years trying," says Kevin Ryan, the former CEO and co-founder of DoubleClick who is now CEO of ShopWiki.

Such relationships would be valuable to any Internet player. But they're particularly important to the large search engine providers because they have their own stables of advertisers that are looking for new opportunities on the Web. "I'm surprised a deal for DoubleClick hasn't happened earlier," says eMarketer analyst David Hallerman. "It's really classic marketing: Once you have a customer it is easier to sell more to them." DoubleClick, and the other parties reportedly discussing acquisitions, declined to comment for the story.

Extending a Search Engine's Reach

DoubleClick's value may be on the rise, too. BusinessWeek.com has learned the firm is poised to unveil a new advertising exchange. Currently, DoubleClick delivers and tracks ads on sites with which the advertiser has an existing deal. As an exchange, DoubleClick would facilitate deals between publishers and advertisers that have not yet worked together. So, say, a toy seller on DoubleClick's site looking to reach out to former online customers could buy space on a parenting site that, at that moment, is being visited by a user who recently visited the toy seller's site.

In the hands of a search engine, such a capability could become even more powerful. Search engines have data on the queries performed on their site and can deliver ads next to search results. But they can't deliver ads when the user who performed the search leaves their network of sites. With an exchange, the search engine could potentially buy space on other sites where their users go, serving ads on the fly as their users appear. The search engine would be able to extend their reach and add value for their own advertisers.

Yahoo realized this potential in October when it spent $45 million for a 20% stake in Right Media, a marketing technology firm similar to DoubleClick (see BusinessWeek.com, 3/6/07, "Right Media's Big Ambitions"). Right now, Right Media enables Yahoo to get higher prices for ads on its lower-cost inventory, such as user-generated sites, by allowing more advertisers to bid, on short notice, on that space. Right Media CEO Mike Walrath would not say whether Yahoo is buying space on sites outside its network visited by users who search or surf on Yahoo. However, the company has expressed interest in doing so. "I think it's intuitive," says Walrath. "They have the sales force and the data. They need access to the inventory."