Google vs. Microsoft: Vying for DoubleClick

(page 2 of 2)

Microsoft Most in Need

Yahoo's stake does not give the company preference in an acquisition for Right Media, says Walrath. Should Microsoft or Google lose the bid for DoubleClick, they could turn to Right Media or another DoubleClick competitor as an alternative. Walrath says the company would be open to discussing a deal, provided Right Media was preserved as an open exchange.

A DoubleClick purchase by Microsoft or Google would enable either company to compete more aggressively with Yahoo in the display advertising market. However, Walrath, a veteran of DoubleClick, believes his exchange has an edge on anything that DoubleClick could immediately offer.

Microsoft may have the most need for DoubleClick's capabilities and relationships. The third-place search engine behind Google and Yahoo, Microsoft does not have the volume of queries to make the kind of money Google and Yahoo do from putting related text ads next to search results. Unlike Google, it also doesn't have a vibrant network of partner sites on which to serve ads. And Microsoft doesn't have the relationships with AOL and News Corp.'s MySpace that Google outbid it for in 2005 and 2006, respectively (see BusinessWeek.com, 8/8/06, "Google Gets Back into MySpace").

In addition to bolstering its inventory on which to serve ads, a partnership with DoubleClick could give Microsoft an opportunity to strike a deal with AOL or News Corp., says Dave Morgan, chairman of TACODA, a firm that targets advertising across the Web. Morgan was formerly the chairman of Real Media, before he sold it to 24/7 Media (TFSM) for $1.9 million in stock in 2001. "If Microsoft buys DoubleClick, it puts them in the advantaged position of knocking Google out of AOL and MySpace in the next two years," says Morgan. "That piece alone is probably worth an incremental billion dollars."

Potential for Backfire

Google's interest in DoubleClick may be largely to prevent Microsoft from acquiring it. Though DoubleClick would give Google a considerably larger presence in the display advertising space and new advertiser relationships, Google is already testing a display advertising network. The search giant could, arguably, leverage its existing advertiser base to get its own network off the ground. However, Google doesn't want Microsoft gaining traction in the space and undoubtedly wants to protect deals such as its $900 million agreement with News Corp., which gives it the right to serve search ads over three years to the audience on MySpace and several other Fox Interactive properties.

An aggressive acquisition by Google, however, could backfire. As the ad-serving tool for sites such as AOL and News Corp., DoubleClick has information on large publishers' advertiser relationships that many online sites don't want in the hands of the imposing Google (see BusinessWeek.com, 4/9/07, "Is Google Too Powerful?"). If Google acquired DoubleClick, it would have to clarify how it would, and would not, use the information—or some of DoubleClick's biggest customers could bolt. Ryan says the threat is real.

"All the big players now want to be able to expand and have the critical mass to sell beyond their own site," says Ryan. "But it is a tricky balance."

Holahan is a writer for BusinessWeek.com in New York .