Google buys DoubleClick for $3.1 billion

“What’s ridiculous about that?”

That particular idea viewed in isolation is not ridiculous. But put it next to the popular view that “MSFT is DEAD and can never do anything significant in the online space” and see how it looks.

I don’t see any saying they are DEAD in relation to this. I do see people say they can’t do anything significant in the online advertising space — and that is TRUE. And in terms of search it is also TRUE. They’ve done some things in some areas with some Live properties, but they have all been essentially irrelevant financially and strategically.

It seems to me that you are drawing together anything negative about MS to paint your own little conspiracy theory.

Damn Goebbels. I hate when I agree with you.

The stock market does too. Neither Google nor Microsoft really moved much yesterday.

This is another “moat” around Google’s advertising business. It just made Google’s core business (advertising revenues) much more difficult to attack strategically.

Microsoft isn’t going anywhere. When we say “Microsoft is dead” we don’t mean literally. We mean its growth is now constrained in a box and it will have to fight to get out of that box (and, yesterday proved that Ballmer isn’t willing to give up billions to fight).

So, what does this all mean? The stock market is yawning. Why? Cause this purchase locks in place Google’s ascendancy and locks in place Microsoft’s ability (er, inability) to get anything strategically going.

And, Seshadri, this isn’t personal. It’s just that Google has a far more interesting business growth path than Microsoft does. And Microsoft’s own president knows it.

That makes Google the more interesting company to watch, talk about, and consider.

Microsoft still has tons of advantages over Google, though. You’re right that we shouldn’t write it off. Any company with billions in the bank can ALWAYS become interesting again! (Look at Apple).

@Scoble: “What do you think?”

I think you should rename your blog to “Googleizer”!

Well, I’ve definitely been “Googleized.”

Okay..I was off-topic a bit here.

As for as this deal goes, only time will tell if this a sound deal or not(as someone already noted in the comments) and again, no one except google would have been justified in doing this.

My rant was about not finding some fair pro-con anlaysis on the deal. All that i could read had pretty much the same point – this was a victory to google bcos MSFT lost out.

“(and, yesterday proved that Ballmer isn’t willing to give up billions to fight).”

Isn’t it ironic that IBM out revenues both Google and MS with

A. No Operating system

B. No web portal or internet strategy to speak of

C. no hardware line anymore

Has anybody at MS thought of growing in the Enterprise sector?
Like NOT making out of box kiddy software and actually making some huge custom software and support deals?

That would be far too painful for them I fear.
So the rest of us keep making money off of that.

One of the blogs mentioned that Google’s ad model was an anti-theses to the DC model and that was one of the reasons for its success. Now by acquiring DC they have some level contradictions in their as business model.

It would be great to see some validation/invalidation of theories like this and consider tehcnological implications as well…

Correction, there is of course AIX, but that is quickly shifting to Linux.

Scoble, in relation to your Kevin Johnson statement: do you think Microsoft no longer believes there is growth left in their core markets and that advertising was the best and most promising industry (the only foreseeable one with real growth on their scale) or were they just seeing the massive success of Google and the potential of the advertising market and, with usual hubris, assuming they could just step in, providing them an easy growth path?

I think, by the way, there are further lessons about Microsoft. A couple of years ago, it was believed they could get into the space with small acquisitions and technology, but those efforts had no effect against the Google Juggernaut. (This also was supposed to leverage existing properties and strengths (MSN, Hotmail — remember when Hotmail was talked about as the most important web property? Now even if still immense, it’s completely irrelevant strategically and financially in relation to the competition… But those web properties are losing value or are dying in a reallignment process that hasn’t resulted in any value yet…) So analysts have shifted to saying they could buy (bigger) into the market. But DoubleClick was primarily the only significant feasible opportunity. They’ve lost thus far on their typical strengths: buying power, leveraging existing properties, and developing their own tech.

Without some yet unseen rebirth, crystalization, and major leap from the Live initiatives… (True gut-wrenching hard work and fighting involving developing their own tech and changing their strategy to something yet unseen) I don’t foresee anything good for Microsoft in this space for years to come.

Which makes Yahoo extremely important. If Google continues to make gains and Microsoft continues to slide without any major new players in the next couple of years, we won’t necessarily be saying Microsoft is dead but we will say they are irrelevant, we will say they are just an OS and office software vendor… We will be saying things like Google-Apple (combined market cap of 215 Bill vs. MSFT’s 280 Bill) are more valuable, more powerful, more influential than Microsoft even if Microsoft still owns the business and most of the home software market… if the current landscape is accurate and trends continue.

And its Microsoft’s own fault for perceiving all markets as their domain. For commoditizing most industries eliminating their growth opportunities. (In many respects, I agree with Johnson that their growth would come from advertising — I just happen to believe they won’t get any of it.)

So over the next couple of years, I think we are finally going to see real examination of Microsoft’s attempts to enter new markets, its leadership, and strategies. (There cash has dwindled to 26 Billion; Google has 11 billion and is less than half their size; Apple, a company 3.5x smaller, has 12 billion.)

We’ve come along way from when Microsoft was valued at $400 Billion and had $50 billion in cash, Apple was a $10 Billion dollar company, Dell was the financial powerhouse, and Google had no revenue and was just a search engine. They aren’t the 800 pound gorilla in any financial sense anymore — they still dominate 2 software markets, but that’s it… Yet some people haven’t realized the shift yet… They still think no one has the buying power or cash of Microsoft, that they still have all the leverage and expertise.

Somehow, I think this purchase will ultimately be key to a perception shift in the market, will have substantial impact on both Microsoft and Google. And in a much bigger historical sense than just the ad/search space. And for this, $3 billion is a steal.

(I apologize for the essay… I’m sure will think I’m dreaming, smoking crack. I’m seeing this long term and in many ways historically antecedent to the antitrust issues a decade ago which I don’t think people really even appropriately consider the effects of to this day.)

“We will be saying things like Google-Apple”

And what is Apple doing here? Somehow Google’s dominance will kill Desktop OS but not Mac?

@Seshadri,

This blog seems to mention some pros/cons of the deal. I agree with you that it’s too early to predict the outcome of this deal. Of course, I like Microsoft (even though I don’t work there) and that may have influenced my opinion.

Getting back on topic, seshadri, I think the pros-cons have been laid out.

CONS
1. Their is a potential evil perception because of DoubleClick’s past spyware, deep cookie-ing issues. And also moving back into banners/images/videos (They were successful because they avoided them.)

That’s about it. Google was so successful initially in the ad space by getting away from banner/image ads, but it still represents a large portion of the online ad space. And Google was having difficulty entering it. It’s not a contradiction so much as it becomes a compliment. (Do you want text ads, or do you want banner ads, or do you want video ads (another market difficult for Google now?) This isn’t so much a contradiction or issue now that they are dominant in ads and have lost much of the “don’t do evil” shine. And offering the option of text ads pretty much eliminates the concern of banner ad hell for anyone.

The only other con is whether or not you consider it paying too much for too little.

That’s really about it, and the major pro is thwarting Microsoft. Because you want to perceive and see a list of several pros and several cons, doesn’t mean it exists.

Technologically, people don’t like DoubleClick’s core stuff. But this shouldn’t be a problem to Google. It can either modify it to make it “nicer” or it’s just another option on the menu. The big gain “technologically” is the masses and masses of user and advertiser data that Google is getting. (Despite Google’s algorithm expertise and vast cache of data–this really is a big, substantially nugget… even to Google because it specifically correlates to advertisers, the success/failure of their ads, and their consumers.) And the relationships with these advertisers.

There is another substantial technological gain in DoubleClick’s new online marketplace for advertisers. The patents and algorithms behind it are prototypical Google-like goodies.

“And what is Apple doing here? Somehow Google’s dominance will kill Desktop OS but not Mac?”

I’m not putting Apple in this space. I am saying Apple and Google’s financials, power, marketshare in the disparate but growing market segments (consumer electronics, media distribution, consumer software, online advertising, web services… all of the areas that Microsoft sees as its potential for growth) will be far more considerable and relevant. (I primarily paired the two because they are often viewed as the primary Microsoft competitors and they are quickly approaching the smae financials as Microsoft if you add them together.)

Oh, and I’m not saying that either Google or Apple or a combination kills the desktop OS. I am saying that their strengths in new markets can be leveraged into other, not yet imagined markets for future-future growth. Whereas Microsoft gets hemmed in, lacks growth, and is left with 2 markets it can no longer leverage into new markets. This does not “kill” their marketshare, but it does “kill” their financial, market power. Absolutely. In many ways, it’s already happened.

Goebbels: for Microsoft they need massive opportunities to see even slight growth. That’s the problem with being so big.

They see the $300 billion advertising industry as offering far more growth potential than selling another copy of Office or something like that.

Pretty much explains why the stock price has been flat. Actually it’s been going down, if you remove the effect of stock buybacks have had.

Oh, I know, Scoble… The question was more… considering the entire landscape was Johnson’s statement really their best strategy with few other opportunities… or were they just distracted by Google’s stock ascendancy like a shiny object, and they proceed with the assumption that they can do anything?

I think where in agreement… I’m just wondering: now that I think they are thoroughly “cockblocked” out of the ad space, do you know what else Microsoft perceives as an opportunity> Have any of your own ideas?

“They see the $300 billion advertising industry as offering far more growth potential than selling another copy of Office or something like that.”

They just want a slice of the pie. It’s not like they’re putting all their eggs in one basket. It actually matters more to Google. Google can’t afford to lose in this market.

“they are quickly approaching the smae financials as Microsoft ”
67 & 63 : Apart from the ‘competes with MSFT’ plank there’s no way AAPL and GOOG can be bracketed together (however you may want to spin it).

It’s like saying Me and Bill Gates have billions of $$$ between us.

In fact the hardest hit guy when GOOG decides to do some sort of consumer software would be Aaple.(think a $500 laptop with just a maxthon browser, google wi-fi and Google apps)

It’s interesting that people so easily discount an entity that is atleast 3rd in about 10-15 different segments.

“It’s like saying Me and Bill Gates have billions of $$$ between us.”

Not really, but if you want to believe so.

“It’s interesting that people so easily discount an entity that is atleast 3rd in about 10-15 different segments.”

It’s easy to do when Microsoft loses money on 8 of them.

“Saran: when I worked at Microsoft Microsoft’s president Kevin Johnson told me (and others) that almost all of its growth would come from advertising-based revenues in the future”

Which pretty much explains why Johnson is no longer in charge of sales.

@60 uhhhhh…Huh? I’m guessing you don’t hang around F100 Enterprises too much.

A. No Operating system

ummmm… never heard of AIX? MVS?

B. No web portal or internet strategy to speak of

err…not heard of their Websphere line of products?

C. no hardware line anymore

I’m guessing you’ve never heard of the iSeries, the pSeries, the xSeries, or any of IBM’s UNIX or Linux servers? or any of their other Intel or AMD based servers? Their intellistations? Their SAN’s, or NAS’?

@66,

The answer is simple, as I outlined above in post #38:

block all ads when browsing. It’s simple to do and you enjoy an ad-free Internet.

I don’t like being marketed to, and therefore, I refuse to have ads shoved in my face.

Windows users can use Firefox with the adblock extension or download Privoxy, while Linux users can use FF or Konqueror, which has adblock pre-installed.

Why do I want to help someone else make money. Another thing you can do is to block referrer logging, so your cookies are not tracked from one site to another. Accept only cookies from sites you visit. Also turn off pre-fetching.

#46,48.
MS don’t have any product to integrate such big Ad.business acquisition. As per Mr. Kevin, If MS really had such clear vision, they should have bought it 2 years ago when DoubleClick was worth of below 1B. Online business can have clear strategy for more than 2 months ahead of time?, Dr.Eric told in press conference “No big deals ahead” in earlier march 2007. but now 3B+ deal.

The result of this acquisition is a wait and see game, Google do not get immediate pay back, may face business alignment/Privacy problems similar to MS, till this time MS Is struggling with 2 similar product line up (msn vs windows live) and privacy issues in UK. Even If MS have bought, would be an Ad-business learning phase, privacy issues(DoubleClick uses cookies) and long time pay back.

Yahoo had a chance to compete head to head with Google, they have missed it (is it a too big amount to you Y?)

I would recommend to MS&Y that don’t copy/paste Google Ad-Business model, there are lot of places still to be explored. for ex: “Advertisement as a Service” (more freedom to advertisers, especially in Enterprise space). How Google complementing MS business?, everything at ‘Cloud’.

Generally, Microsoft willing to buy technologies, but not coming forth to buy content or users, I don’t know why(what are you going to do with 30B cash?)

Personally, I hate to see large companies are going on the direction to grow via acquisition instead of R&D / Innovation.

Kind rgrds
Saran