Google Buys DoubleClick for $3.1 Billion
Google reached an agreement today to acquire DoubleClick, the online advertising company, from two private equity firms for $3.1 billion in cash, the companies announced, an amount that was almost double the $1.65 billion in stock that Google paid for YouTube late last year.
Context & Ripple Effects
Google had entered a reported contest for DoubleClick eleven days earlier. The agreement turns that pursuit into a $3.1 billion cash transaction with DoubleClick's private-equity owners, at a price almost twice Google's $1.65 billion stock purchase of YouTube in 2006.
The deal matters as a notably larger acquisition commitment by Google and as a transfer of an online-advertising company from financial owners to a major internet platform.
First-order effects
- DoubleClick's private-equity owners gain a $3.1 billion cash exit, while Google assumes control of the company under the agreement.
- Google commits substantially more value to DoubleClick than it did to pursuing the company earlier in April, making the bidding outcome decisive for the parties involved.
Second-order effects
- The cash structure and price give other owners of online-advertising businesses a fresh benchmark for what a strategic buyer may pay for a scaled asset.
- Google's larger cash deal, following its $1.65 billion YouTube acquisition, raises the competitive cost of securing major internet properties through acquisition rather than organic expansion.
Third-order effects
- If large internet platforms continue to buy independent advertising businesses, ownership of advertising infrastructure will shift from financial sponsors and standalone operators toward the platforms that can fund multibillion-dollar deals.
- The transaction points to competition in online advertising being shaped not only by products, but by which companies can use acquisitions to assemble complementary internet businesses.
The trend: Google is using increasingly large acquisitions to expand its position across internet businesses, making access to capital a greater factor in online-advertising competition.