Why Google bought DoubleClick

If there was any need for proof that Google considers advertising its core competency, then last few days provide ample testimony to that fact. The Mountain View, Calif.-based company has partnered with Clear Channel Communications to sell radio ads, a move that follows their decision to snap up DoubleClick for $3.1 billion which has been the big news of the weekend.

The DoubleClick acquisition showed that Google is willing to spend any amount of money to defend its advertising turf. The deal has also prompted AT&T, Yahoo and Microsoft to cry foul and whisper to media about an anti-trust investigation, a preposterous notion, considering that Microsoft had a chance to outbid Google.

To get a more realistic perspective on Google’s decision to buy DoubleClick, I reached out to Mark Kingdon, CEO of Organic, Inc., a leading online marketing firm that works closely with Fortune 1000 companies. Mark is an expert in Internet branding and online advertising. We met when I was reporting a story for Business 2.0, and since then I have come to rely on him as a barometer of sanity when it comes to online advertising. I did a short interview with him, to get his take on Google’s move to buy DoubleClick. Here are some excerpts.

Om: There are some who believe that this deal marks the return of the banner. What do you say to that?

Mark: Did it ever go away?

Om: Is this an attempt by Google to exert more control on the advertising market and at the same time keep competitors at bay?

Mark: DoubleClick is a very strong complement to Google’s dominant search offering. If Google develops an equally strong offering in video, gaming (AdScape), mobile and digital outdoor, they could offer advertisers a way of reaching consumers just about anywhere in the digital world.

Om: What is the real value of DoubleClick?

Mark: This was a strategic purchase. They locked out a competitor (Microsoft) and expanded their core business in a closely related area. It is Business 101. It’s about speed to competitive advantage. Google gets a leader in placing display advertising which brings along a very large advertiser base. Google has a big brain trust and will likely find new ways to aggregate, segment and optimize.

Om: If you look beyond today, how does this acqusition help Google? Does this buy them time, as the advertising industry tries and figure out its future models?

Mark: Advertisers buy what they know and they innovate on the edge so Google is expanding its relationships and market coverage. Everything that’s happening on the edge is having a gut-wrenching impact on the big middle. Think about YouTube and its impact on big media. Business models are slow to change when billions of dollars are at stake.

Om: Both Google and DoubleClick are moving ahead and setting up ad-exchanges. Are they a key component to this deal?

Mark: TBD. It sounds like an obvious direction for Google to take. Add in real- or near-real time optimization across different digital media and you have a mouth-watering concept. Everything from commodities to collectibles are sold on exchanges so why not ads? Here’s why: there is a big business built on the buying and selling of ad space. It comfortable, familiar and very profitable for the participants.