DoubleClick: Google Acquires Microsoft's Latest Survival Attempt

How much worse can things get for Microsoft (MSFT)? After having almost certainly begun the DoubleClick bidding, thus putting the online ad company in play, Microsoft has seemingly been outbid -- again -- by Google (GOOG).

Some seemingly think the price is vertigo-inducing, working out to something like 30-times DoubleClick's $100-million in 2006 ad placement revenues, or 12-times this year's forecast ad revenues of $230m or so. Yoicks! Can you justify that price based on economics? Some people will try, and that is always good fun; others will go on endlessly about the bubble-ish price. Both sides are wasting their time because the more interesting rationale is mostly elsewhere.

To borrow a phrase from Microsoft's past, this is a brazen attempt to cut off Microsoft's future air supply. The latter company is losing share in search, failing at ad placement, trying to find a new leg to growth, and generally floundering expensively in these crucial new fast-growing markets. What better way and time for bid-'em-up Brin to stick the knife in deeper every time Microsoft spots a possible life raft than for Google to buy the target acquisition company -- like DoubleClick -- out from under Microsoft.

This was, in other words, a strategic and offensive buy, not a financial one, even if you can make a financial quasi-justification for the price. Google is playing very hard ball with Microsoft, deploying brutal tactics right out of the Redmond playbook, circa 1995. Call it $2-billion for DoubleClick's revenues and customer list, plus another $1-billion for a pinched air tube to Microsoft.

As a a related aside, this buy pretty much guarantees that Yahoo (YHOO) will sooner rather than later be in play, perhaps in the next two quarters, and I can't wait to see what happens.