Alberto Saavedra 2.0

Last Sunday I was reading Eric Schmidt’s interview and it was the first time I did not see a explicit mention about search when he was describing Google. As John Battelle precisely understood from Google’s CEO answer, their business goal is to be the foundation for advertising and commerce on the web and DoubleClick’s acquisition price paid in cash ($3.1 billion) is a strong signal of what Google is going to do to maintain leadership in the online advertising market.

Two years ago Microsoft decided to build their own advertising network to provide display, search and content ads. adCenter has been launching its official operations progressively: France & Singapore (September 2005), US (May 2006), UK (August 2006) and Canada (February 2007); a contextual advertising pilot: ContentAds and introducing some breakthroughs in their adCenter Labs. While the system is maturing Microsoft needs to gain market presence; Google’s dominance in US search traffic with 64.13% of market share played some role in the decision to create the Search and Ad Platform group which could had some influence in Microsoft’s interest in acquiring DoubleClick.

DoubleClick is one of the leaders in display advertising serving. Last year revenues’ estimates are between $100 million - according to the Wall Street Journal - and $300 million - according to the New York Times - which are in tune with the $383 million reported by ValueClick’s Media division and $122.4 million reported by aQuantive’s Digital Marketing unit. DoubleClick just launched an advertising exchange service to connect top-tier advertisers and agencies with leading online publishers which raises the company’s value but $3.1 billion is too much.

Google has its own display advertising network but this one is not as resistant as Adwords/Adsense auction-based to competitive attacks, so when Microsoft’s interest in DoubleClick to gain market position was known, Google had to bid to protect its momentum. The initial asking price of $2 billion was already high so it looks like both giants really fought this one; the firm Hellman & Friedman is the big winner of this acquisition.

I am not sure if Google can declare this a win, they secured their leader position for now, gained access to data of a interesting marketplace and some patents but they may had never acquired DoubleClick if it wasn’t because of Microsoft’s intentions, at least not at the final price accorded. For Microsoft it was a loss, but this was also the case even if they would have outbid Google so they choose the minor loss.

This is just the beginning, Google is the czar of a $16.8 billion online advertising market, but Microsoft, Google, Yahoo and others are getting ready to compete for the worldwide $500 billion advertising market. Text content search and advertising is where the competition has been occurring but for audio/video content the market is still wide open. Companies like Nexidia and its phonetic based search for video advertising and search, technologies for image recognition like Google’s Neven Vision, Microsoft’s gender detection, Riya’s visual search and for video recognition like Audible Magic will generate new ways to accurately target advertising therefore providing added value - instead of annoyance - when displayed.

Labels: online advertising

# posted by Beto : 1:55 AM