Is Internet Advertising Really Worth Billions?

Over the past few months there’s been a huge amount of consolidation in the online advertising world. Google (GOOG) acquiring Double Click (or at least trying to) for $3 billion and Microsoft (MSFT) acquiring Aquantive (AQNT) for $6 billion were the two biggest examples of this consolidation in the past few months. There are a lot of smart people coming down on both sides of the fence as to whether these are good deals for the companies in question. On the other hand everyone agrees that ad servers are incredibly valuable. DoubleClick and Atlas (aQuantive’s ad serving division) are the 800 pound gorillas in the ad server world. When you take a look at the data it starts to become pretty obvious why.

Four out of five people online in June saw a DoubleClick ad and more than four out of five saw an Atlas ad. When you consider the total ad coverage associated with these two behemoths you essentially have coverage over the entire Internet Browser Population. Considering there we’re just over 174 million people online in the US in June, that’s a lot of eyeballs. If we start talking page views then we’re talking over 20 billion ads served to people in the US by Atlas and DoubleClick in June alone.

One way that these guys try to get our attention is through search advertising. Both Atlas and DoubleClick buy sponsored search listings for their perspective clients. When you look at the volume of search referrals sent through Atlas and DoubleClick’s properties we’re looking at some pretty big numbers. Atlas refers about 2.6 million sponsored search listings per month. DoubleClick refers about 3 million sponsored search listings through its properties (including Dartsearch) each month. When you look at the top search keywords resulting in referrals through Atlas and DoubleClick it is pretty interesting to see the brands that emerge.

There are some pretty big brands, both online and offline, that are dependent upon DoubleClick and Atlas to drive search traffic to their site. Even more interesting are the opposing brands lining up behind their ad server of choice. Enterprise vs. National vs. Hertz and Hotels.com vs. Travelocity.com show up in the top 15. If you look a little deeper in to the lists you can find a competitor for nearly every other brand listed above.

Is aQuantive worth $6 billion and DoubleClick worth $3 billion? Smarter people than me seem to think so.

Where do Compete's traffic numbers come from?

Comments

[Jeff Molander_:]

What does this (dependence of brands on Atlas and DoubleClick) say about how consumers use the Web? It says they use search to navigate -- not necessarily to discover.

Affiliate marketing, domaining -- search marketing agencies for that matter have all discovered and 'monetized' the fact. Where have marketers been? For how long will middle-men get to cash in on what amounts to navigational habit? As I see it, there's a sub-economy working behind the scenes: an 'ignorance economy' wherein what marketers' collectively haven't understood has been leveraged into cash.

As well, continued dominance of these companies is threatened by Web 2.0 -- namely the death of the browser and adoption of RSS/XML technologies that allow users to view the Web sans browser! Adoption of RSS has been rapid among popular hang-outs (i.e. Yahoo, MSN -- virtually every major portal provides feed aggregators) and relative newcomers like Bloglines.

With Nielsen et al setting up to focus less on pageviews and more on user "attention" (i.e. length of stay on publisher sites) we're forced to examine how today's major players will cope.

How is Almighty Google coping? One word: Feedburner. One of their smaller yet most important acquisitions to date.

2007 Jul 27 02:02 PM