Inspire

Google-DoubleClick Deal: Integrative Analysis of Pros and Cons

Google has acquired DoubleClick. A deal with a big impact in my view. Before I will elaborate on the pros and cons of this deal, I will would like to show some key digital advertising or eMarketing trends. This overview provides a context against which to evaluate this deal.

Overall eMarketing trends (see more in my previous post on the meltdown of mass media boosting demand for eMarketing):

• Migration from CPM to CPC to even CPL and CPA

• Migration of Ad Networks to Ad Exchanges

• Migration to contextual and behavioral targeting and relevancy

• Migration to seamless integration of eMarketing tools in 1 campaign (lower costs, less frequency caps/less waste, tight integration of keywords in banner creatives etc.)

• Migration of campaigns to platforms (boosting demand for integrated eMarketing solutions)

So what are the pros and cons of this Google-DoubleClick deal for Google ?

Pros:

• Customer base: access to each others clients (verticals and segments included) deepening relationships and increasing retention. Not only websites (DART, AdSense) but also agencies and advertisers.

• Products: a more complete eMarketing portfolio for advertisers (AdWords search ads, buzz marketing, affiliate, rich media, banners etc.) and a more complete eMarketing and measurement solution for site owners. On top of that, the online ad exchange of DoubleClick is very valuable to Google. 

• Pricing: CPCs on AdWords are rising creating a micro-economic saturation point. In effect, this makes traditional eMarketing tools more interesting to advertisers. DoubleClick is the perfect hedge for Google in the middle term.

• Technology: integration of technologies for ad targeting, optimization, Spotlight, Analytics and CheckOut (one interface); as a result ROI based and closed loop marketing is even more effective and efficient. Branding, Search, Analytics and Conversion: a complete solution. Example: integrating banner views and search keywords in 1 campaign -> a prospect might search on Google, click to advertisers' site, doesn't convert to sales, later on targeted banner views to this user to close the deal more effectively (assuming privacy laws allow this...)

• Legal: DoubleClick has 5 interesting eMarketing patents (e.g., user based profiling, optimized ad delivery)

• Competition: edge over Microsoft, Yahoo, AOL and other search and/or eMarketing intermediaries and measurement companies. Also a good move against RightMedia (RMX), now processing $450 million in eMarketing transactions this year.

• Innovation: long term integration with Googles' data centers, Maps/Earth, social networking Orkut, offline media buys (Google print, tv, radio etc.) and Google Base.

• Strategic: lock-in and negotiation power in the whole ecosystem. Higher customer share. Barriers to entry to new web 2.0 ad startups focusing on exploiting unsold inventory of big sites and online advertising exchanges/marketplaces. 

• Data: cross-fertilization of campaigning data from Google and DoubleClick. Sharing learnings on effective creatives, keywords (also used as text in banner creatives), media buying plans, lowering frequency caps for advertisers saving them many due to integration of AdWords with banner views etc. etc.

Cons:

• Strategic and competition: some websites might migrate towards competitive solutions or in-house ad serving solutions due to increased power of Google. And some advertisers might help alternative eMarketing solutions due to (likely) higher prices as negotiation power of Google has increased.

• Legal: regulatory measures due to much monopolistic power and even more so its privacy implications for end users (e.g., the trouble DoubleClick got while integrating offline data from Abacus Direct 7 years back)

I expect Google to continue their buying mode with a focus on :
- Mobile (mobile banners, rich media etc.)
- iTV
- Gamevertising
- Website optimization tools

YouTube and Google: Why ?

What is the rationale for the deal between Google and YouTube in my view ?

Google has: brand, user base, great search technology, distribution partners, clickstreams/intentions, cross digimedia channels, strong in web applications, text based advertising model and mobile social networking.

YouTube: user base, user generated video content, commercial videos, brand name and online social network.

Together they have synergies in brand, user base, social networks (as to rise to the competition of MySpace), channels (mobile, fixed, IP TV, IM), (commercial) video ads besides text link ads, YouTube as a video test center for advertisers -> followed by exploitation in Google search results as sponsored video ads. In effect, Google has increased its negotiation power with (commercial) content owners -> better margins. More importantly, I think this deal is mainly driven by the need to stay number one in the search ad business relative to MSN and Yahoo. The deal with YouTube will jumpstart the lead of Google in video link ads. Additionally, by combining the social networking track record of Orkut, YouTube and Dodgeball, a significant competitor for MySpace might develop over time. Furthermore, Amazon and Apple are focusing on selling video and TV content over the Web. The combination Google-YouTube will bring more commercial impact to this market and rival the ones of Apple and Amazon.