Doubleclick, doubledumb?

April 20, 2007

Immediately after I read the news that Google boughtdoubleclick for more than 3 billion dollars, I got this strange feeling of “I don’t get it“. At first sight, the price paid just does not make sense.

 The price is 10x Doubleclick’s annual revenue. Altough it is likely that margins of Doubleclick are high (say, 30-40%?) and it is likely that Doubleclick’s business is growing fast, we would still be looking at return of investment over too long period (for the vast majority of investors).

 Unless… Unless there were other factors at play… Here is a list of some of them:

  • Block Microsoft and other paid search competitors from getting the knowledge and technology they might use to reduce the competitive advantage Google is enjoying right now.
  • Release some other hidden synergies (comments welcome on what they might be) and increase significantly DC revenue growth.
  • Offer tracking software of superior quality (compared to GAnalytics) to some of its advertisers (increasing thus customer loyalty and possibly revenues if they decide to charge for it. 
  • Connect Analytics and Doubleclick and use the common dataset them to analyze universal user behavior. While scary from privacy perspective, this makes a lot of business sense. This would be something Google is uniquely positioned to do, due to its computing cloud and analytic brainpower. This would give Google permanent competitive advantage (knowledge!) and possibly create a natural monopoly situation for Google as The oficial Big Brother of internet. Let’s hope they do it. And let’s hope they would use their knowledge in the “Do no evil” way…

We just have to wait and see if Google gets more of Doubleclick than it got from YouTube (the stupidest Google’s move so far).

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