ON WHAT GOOGLECLICK MEANS

DOUBLE TIME

One of the first thoughts that hit me reading the news cross the tape that Google had bought Doubleclick for over $3 billion cash, is that a Web 1.5 company was buying a quintessential Web 1.0 company. 

Some deal was long anticipated, since DoubleClick had been on the auction block by it's private equity investors for some time now. (For more background, please see the ongoing discussion on this on Techmeme, along with the press release, and the NY Times and Wall Street Journal articles).

So what does it all mean?  Well, there are a number of ways to read all this.

Yes, the valuation is high on traditional metrics, as Paul Kedrosky points out. 

And yes, this is about both offensive and defensive opportunities in online advertising for Google, as Fred Wilson and Richard McManus point out respectively.

And to answer the question posed by Barron's Eric Savitz,

"This undoubtedly will trigger a wave of speculation on which companies in the online advertising and marketing will be the next to get gobbled up. Any guesses?"

the markets have already been bidding up the shares of the two main public Doubleclick peers, Valueclick and Aquantive, which are each at just below or above a three billion dollar valuation number.  They were both closed up 7% and 6% respectively on Friday, on speculation that either may be a great loser's consolation prize, given that both Microsoft and Yahoo! were reportedly in the bidding for Doubleclick.

So that horse has left the barn.

And yes, the two major constituents in the deal have nicely placed their relevant sound bites.  The lead private equity investor, Hellman and Friedman who is said to have made eight times their money in two years, said this in the WSJ piece:

""This was heavy-duty business building that private equity does enormously well," said Hellman & Friedman's Philip Hammarskjold."

And Google CEO, Eric Schmidt, puts forth this statement:

"The most important thing is that the ad will come faster and will be much more targeted," Google Chief Executive Eric Schmidt said in an interview."

But the main thing that cuts through all the analysis and discussion for me, is that the advertising business is truly going online in a mainstream sort of way. 

There's been a longstanding, growing disconnect over the last decade, between the amount of time that mainstream folks were beginning to spend on the web, and the relative sizes of the online advertising market compared to it's traditional, off-line complement.

The GoogleClick event is an importer marker that these relationships are well on their way to inverting over the next few years.  The tail is on it's way to wagging the dog.

DISCLOSURE:  I was the lead equity research analyst on the DoubleClick IPO in 1996, in my former professional capacity.  I  hold shares in a number of the public companies mentioned in this post.

Comments

[ashkan karbasfrooshan]

Michael, not sure if you can answer this, but re: "I hold shares in a number of the public companies mentioned in this post."

When a company is taken private, does the buyer buy up 100% of the shares in the company or do some shareholders keep shares, as a minority, alongside the private equity firm?

Thanks

Ash

[Bill Hobi]

Web 1.5 Company?

Web 1.0 Company?

Web 2.0 Company?

How many Web "." Company models are there these days? What is state of the art?

When/Where is Web 3.0?

[Bill Hobi]

Yes, the advertizing world is finally moving to the Web, but is Web advertizing really effective? I NEVER look at all these "pop ups" and "Banners" at the top of a MySpace page or whatever...

And when you highlight an ad, such as the "Stuffed PC" ad by Apple; it is a Television Ad... sure you can view it on YouTube... but how many people "view" (even) a really good ad on YouTube - a few hundred thousand? How many people see that same ad when it is run during American Idol - 20 million?

The thing that I see running through all of this is that "Print" media is really dead... I read Vanity Fair,the Sunday NYT and Barron's (because I have to)... but increasingly I even read Barron's online - and the reason I read Barron's online is that it is laid out just like the magazine, and I can easily find 100% of the content online, unlike most publications that just offer a few "snippets" of the total content that is available in print.

I couldn't tell you the last time I read BusinessWeek, Fortune, Newsweek, or WIRED!, etc. I get more "content" from Bloggers today than I do "mainstream" print media. I read more Blogs than magazines! So these magazines have already lost out to the Bloggers. They are dinos! The only time I see something in one of these mainstream mags is when a Blogger links to it!

[Vijay Chandran]

What about the issue raised by msft any comments on it. I really would like to hear your view point and its impact on Goog stock.