Sparrow Technologies Limited

[Cyrille Mixtapes]

Atissue is how Google controls key parts of the digital ad supply chain to give itself an advantage. It operates two tools used by advertisers to buy ads (Google Ads and DV 360); an ad server used by publishers to distribute online ads (DoubleClick For Publishers); and an ad exchange where advertisers and publishers buy and sell ads through auctions (AdX).

In December 2020, we explored five scenarios that could have happened if Google had never acquired DoubleClick. The pivotal 2007 deal laid the groundwork for its outsize influence in digital advertising.

This perilous yet vaunted position in which Google finds itself has been more than a decade in the making. The pivotal acquisition that set Google on its path toward global advertising domination occurred back in 2007, when Google ponied up $3.1 billion in cash to buy NYC-based DoubleClick.

In the end, Google won a competitive auction for DoubleClick, and the rest, as they say, is history. The DoubleClick acquisition instantly positioned Google as a leader in both search and display, and it prevented its key search competitors at the time from gaining a better foothold in the emerging display category.

The most likely scenario here would have been Google investing in alternative ad formats only available through its own stack and a likely stratification of ad tech stacks at the top of the market. If publishers were to have embraced the Google stack sans DoubleClick, its homegrown offering would have likely prioritized APIs and custom, modular builds (similar to how Amazon Web Services goes to market or the Adzerk/Kevel model). For Google, being a tech company, this approach makes sense and plays to its strengths and depth of expertise in engineering.

Our unique perspective rooted deeply in AdTech, MarTech, SaaS, media, entertainment, commerce, software, technology, and services allows us to accelerate your business from strategy to day-to-day execution.

A week before most of the advertising industry gathered at the Cannes Lions International Festival of Creativity\u2014where Google is a big sponsor\u2014)the European Commission initiated formal antitrust proceedings against the company and called for a breakup of its digital ad business. Regulators say Google breached antitrust rules by using its ad buying and ad serving tools to favor its ad exchange at the expense of other exchanges, publishers, and advertisers. A mandatory divestment, the EU says, is the only way to address these concerns.

Antitrust pressure has been mounting on Google for years. The bloc has already fined Google more than $8 billion for assorted antitrust violations. The EU began probing Google\u2019s ad tech business in 2021, and it is also facing an investigation in the UK. In the US, the Department of Justice sued Google in late 2020 for anticompetitive practices in search advertising. The DOJ and several states have also sued the company for violating antitrust laws in its digital advertising business. The DOJ is pushing for Google to sell Ad Manager, its product suite that includes its ad exchange and ad server.

Digital advertising in 2007 was a nascent discipline: The IAB/PwC annual internet advertising report pegged the value of all of US digital display advertising at $5 billion. Advertising sales were relationship-driven and quite manual in nature \u2013 lots of phone calls, fancy dinners, and networking events made insertion orders move. The three key players in search \u2013 Google, Yahoo, and Microsoft \u2013 were all expanding aggressively into display. And all three were interested in DoubleClick for different reasons.

Yahoo was rapidly losing search market share and, under Terry Semel\u2019s leadership, seemed to be trying to shed its tech company roots in favor of being perceived as a media company. Despite its identity crisis, Yahoo's homepage was a must-buy for large campaigns and Yahoo\u2019s display assets were growing handsomely. An effective direct sales team brought in revenue while the company worked to figure out how to monetize remnant inventory in efficient ways (an area where DoubleClick could have certainly helped and was later addressed by its RightMedia acquisition). Microsoft (and MSN) was also a must-buy for advertisers. The software company was used to selling to enterprise clients, so adding DoubleClick\u2019s suite of tools for enterprise-tier advertisers and large media companies would have been right on the mark. There was also a potential defensive angle of DoubleClick off the market to slow Google\u2019s growth in display.

Google had indeed been growing quite aggressively, but it lacked direct relationships with advertisers. Without those relationships, its growth in display would have been limited and, short of acquisitions, that\u2019s not an easy capability to enable overnight.

While DoubleClick is primarily thought of as an ad server, it had four different product lines at the time of acquisition: publisher ad server (DART for Publishers, aka DFP), advertiser ad server (DART for Advertisers, aka DFA), several search and data services products mainly based on DoubleClick\u2019s acquisition of Performics, and the just-released DoubleClick Advertising Exchange.Its biggest assets were strong relationships with advertisers, agencies, and publishers. Doubling down on pure-play independent ad tech for the world\u2019s largest publishers and advertisers would have been the way to go, but few companies at the time thought of their digital ad servers as truly strategic assets. With private equity ownership, the onus to sell was undoubtedly high; if not Google, then the other two bidders \u2013 Yahoo and Microsoft \u2013 as well as AOL and telcos would all likely have been in play as strategic acquirers. Had DoubleClick remained independent, it would have likely faced immediate pressure from Google, which has a tendency to offer ad tech tools for free in order to quickly lock up a market. (Consider how the release of Google\u2019s free Tag Manager product essentially obliterated a rather vibrant tag management category in 2012).

Microsoft would go on to buy DoubleClick competitor Atlas/aQuantive in 2007 for $6.3 billion in cash. The acquisition didn\u2019t provide the same benefits to Microsoft as DoubleClick provided for Google: Microsoft took a $6.2 billion write-down, and it sold off the Atlas piece to Facebook in 2013 for close to $50 million, according to news reports. While that didn\u2019t have a happy ending either, Microsoft didn\u2019t lose much in the long term. (The same cannot be said for Yahoo.)

Google was already making inroads into display prior to its Doubleclick acquisition, but unlike search, display was more high-touch. On the product side, Google would have likely built a competitive set of ad servers, similar to how Facebook built its own tech. What Google didn\u2019t have were the relationships that would put those ad servers to good use (even if they were free). Choosing a different ad server (such as 24/7 RealMedia\u2019s OAS, which WPP bought in a reactionary move following the DoubleClick acquisition) would have also made sense for Google, as long as the goal was explicitly to touch both the buy and sell sides. The most likely outcome would have been much slower growth and, in case either Yahoo or Microsoft bought DoubleClick and executed well, a potential reversal of fortunes and loss of market share on the search side. In other words, today\u2019s Google could have been Yahoo.

As attractive as DoubleClick was, arguably the biggest value-add wasn\u2019t the tech, which is a somewhat ironic realization for one of ad tech\u2019s most pivotal acquisitions. DoubleClick also solidified Google as a strategic ad tech acquirer. The experience of integrating such a big, formerly public company into Google\u2019s culture and the footprint it was able to create in New York set up Google favorably for subsequent activity (not to mention the mountains of cash it have been able to so reliably generate every year). To date, DoubleClick remains Google\u2019s third-largest acquisition, preceded solely by Motorola Mobility in 2011 for $12.5 billion and Nest Labs in 2014 for $3.2 billion. Without DoubleClick, perhaps its appetite for subsequent ad tech acquisitions would have been much more tempered.

Instead, Google\u2019s subsequent ad tech deals gave Google the \u201Cbuilding blocks\u201D needed to play at every step of the online ad sales process. \u201CGoogle has put it all together,\u201D Jeffrey Rayport, an online marketing expert at the Harvard Business School, told The New York Times. \u201CGoogle is the market under one roof.\u201D

3a8082e126