Much Ado About DoubleClick

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Gathering Intelligence

The ability to access and harness Web user data is a key factor driving a flurry of acquisitions of online ad outfits (see BusinessWeek, 5/21/07, "Behind Those Web Mergers"). Yahoo! (YHOO) can use Right Media, which it announced plans to acquire in April, to gather intelligence on what its users are doing on the Web and place ads in front of them when they are off Yahoo's sites (see BusinessWeek.com, 5/1/07, "The Promise of Online Display Ads"). Microsoft's (MSFT) planned acquisition of aQuantive (AQNT) for $6 billion arguably holds similar appeal for the software giant to offer better ad targeting on more sites (see BusinessWeek.com, 5/18/07, "Microsoft's Big Online Ad Buy").

The FTC has asked Google for a wide range of information. Some of it is undoubtedly aimed at helping the commission ascertain just how much information, and resulting power, a Google-DoubleClick union could put in the hands of one company. The next step, which could take several months, is for the FTC and Google to negotiate terms under which the FTC would feel comfortable allowing the deal. "It rarely goes to trial," says Allison Davis, a partner at Davis Wright Tremaine, based in California, who specializes in antitrust cases. "The investigation raises concerns and those concerns need to be alleviated and addressed."

Sometimes, says Davis, the companies sign "consent decrees," such as agreeing to divest an aspect of the business that gives the combined company too much control over a specific market, or limiting how the two companies will combine their assets. After the companies have reached the extent of negotiations, the FTC typically has 20 days to decide whether to sign off on the deal.

Google's Response

Google has several strong arguments for not needing to concede much. For one, it has not been a major player in the online display advertising market, which the FTC could view as a different animal than search advertising, says Davis. Also, its competitors in search, namely Yahoo and Microsoft, as well as competitors in the online advertising market in general, namely WPP Group (WPPGY), have announced intentions to acquire ad networks that compete with various parts of DoubleClick's business (WPP purchased 24/7 Real Media (TFSM)). "I'm sure that is part of their story," says Davis. "Everybody else is buying up these guys…and just because we have the best search engine doesn't mean we should be punished."

In a statement, Google pointed to similar acquisitions as evidence of healthy competition in the online advertising space. "We are confident that upon further review the FTC will conclude that this acquisition poses no risk to competition and should be approved," said Don Harrison, Google's senior corporate counsel. "Numerous independent analysts and academics have determined, after looking at this acquisition, that the online advertising industry is a dynamic and evolving space—as evidenced by a number of recently announced acquisitions—and that rich competition in this industry will bring more relevant ads to consumers and more choices for advertisers and Web site publishers."

Unique Concerns

Microsoft, which along with AT&T (T) raised concerns over Google's intended acquisition, insists that a Google-DoubleClick merger has unique anticompetitive aspects that its intended purchase of aQuantive does not. "We believe the enforcement agencies will conclude that our deal will promote competition, and that the Google deal will reduce competition," said a Microsoft spokesperson in a statement.

However, some antitrust experts and groups that complained about Google's deal see Microsoft's proposed merger as a similar—though smaller and less threatening—animal. The Center for Digital Democracy has raised privacy concerns about Microsoft's planned purchase of aQuantive, says Chester.

Forrester (FORR) analyst Shar Van Boskirk believes the recent acquisitions, along with the presence of competitors such as ValueClick (VCLK), BlueLithium, and Tribal Fusion—to name a few—can't help but give Google more leeway to push its deal through with few, if any, major concessions. "It makes Google look less aggressive," says Van Boskirk. "Everyone is trying to create this set of integrated services." And they're all collecting data to sell more targeted ads.

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