Google buying ad company DoubleClick for $3.1 bil

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Google's announcement of a deal last week to acquire DoubleClick for $3.1 billion in cash quickly makes it a leader in online display advertising, an industry DoubleClick helped to create a decade ago.

For DoubleClick, the hefty price tag can be seen as a sort of vindication. The company was a highflier during the Internet bubble era, with a stock that routinely topped $100. But when the bubble burst and analysts and investors began doubting the staying power of Internet advertising, DoubleClick shares tumbled and many of its competitors went bust.

Internet advertising in the U.S. dropped 12.3% in 2001 compared with the previous year and another 16.6% in 2002 to $6 billion, and DoubleClick shares tumbled to $6 in 2002.

But Internet advertising has been in explosive growth mode just about ever since, reaching $15.5 billion last year and expected to be at about $18.5 billion this year, according to PricewaterhouseCoopers.

DoubleClick was purchased two years ago for $1.1 billion, or $8.50 per share, primarily by Hellman & Friedman, a private-equity firm with investments in such media companies as ProSiebenSat.1, Axel Springer AG, Young & Rubicam and the Nielsen Co., parent company of The Hollywood Reporter.

Google's acquisition of DoubleClick, announced Friday, is its biggest purchase ever and the first since buying YouTube for $1.65 billion about six months ago.

With DoubleClick, Google gets a company that provides display ads to such sites as MySpace, owned by News Corp., and AOL, which primarily is owned by Time Warner, with Google maintaining a minority stake.

Google, of course, leads the industry in text-based search advertising but has been struggling against Yahoo! and to a lesser extent Microsoft in the display advertising business.

Google CEO Eric Schmidt said during a conference call Friday that he had been considering an acquisition of DoubleClick "for a very, very long time."

Reports surfaced a few weeks ago that DoubleClick was taking bids from Google, Microsoft, Yahoo! and Time Warner and that the price tag was presumed to be about $2 billion. Observers have speculated that it rose to $3.1 billion because Google was desperate to keep DoubleClick out of Microsoft's hands.

"The DoubleClick platform touches so many of the existing Google customers," Schmidt said. "It accelerates our entry into some of these markets by some number of years."

Schmidt said the purchase ought to close this year, and he doesn't anticipate objections from antitrust regulators.

DoubleClick recently introduced an electronic trading exchange for bringing Web publishers and ad buyers together in an advertising auction environment, a product some analysts have high expectations for.

The purchase also is seen as a boon to the publicly traded competitors of DoubleClick, such as ValueClick and aQuantive. Shares of ValueClick, a $2.9 billion company, shot up 7% in after-hours trading Friday after Google's purchase of DoubleClick was made public. Shares of aQuantive, a $2.2 billion company, rose 6%.
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