Google's DoubleClick Acquisition: Not Yet a Done Deal?

A blog entry in the TechConfidential suggested that FTC will be approving Google's acquisition of DoubleClick. If it turns out to be true, it will be an end to a long debate about the dominance that Google (NASDAQ: GOOG) has gained in the ad serving space in the context of DoubleClick acquisition.

It was in mid-April that Google announced the acquisition of DoubleClick for $3.1Bn, at almost double the valuation of aQuantive, ValueClick (NASDAQ: VCLK) and 24/7 Real Media then. The acquisition immediately raised questions of competition and privacy. Concerns surfaced on how publishers and advertisers would give a controlling call to Google, when it comes to giving GOOG access to their pricing and demographic data available with DoubleClick. Prior to the DoubleClick acquisition, ad serving companies in the genre of DoubleClick have functioned independently.

The DoubleClick acquisition was meant to spearhead Google in display advertising, thereby putting companies like Microsoft (NASDAQ: MSFT) at a disadvantage. And true to expectations, MSFT has been influential in raising anti-trust issues on this deal. MSFT, which itself has been a target of anti-trust allegations, hired public relations firm Burson-Marsteller to generate public opinion against the deal. In addition to the concern that Google could engage in price manipulation, issues of privacy also came up.

If the FTC is approving the deal, it signals an acceptance of Google's argument - "Google and DoubleClick are complementary businesses, and do not compete with each other". While Google would have successfully cleared the FTC's pre-merger scrutiny, the company may still have to go through post-merger scrutiny should complaints emanate about abusive usage of private information.

Google has been taking preemptive measures by reducing its cookie life span to 24 months from 30 years and anonymizing IP addresses and cookies in Google's server logs after 18 months. The company, in some of its services, is also providing the choice on whether to share personal information. Google has tried to project its application to Network Advertising Initiative (a cooperative of online marketing and analytics companies where DoubleClick, Yahoo, 24/7 and Tacoda are already members) as another endeavor for protecting consumer privacy. It would be interesting to see how MSFT will position itself in the next round of debates, considering MSFT's ownership of aQuantive and AdECN.

If the DoubleClick deal goes through, Google would have more energies to focus on other legal issues including the one related to YouTube. Despite the legal hurdles and the comments that Google paid too much as an acquisition price, Google stock price has gone up 45% since the announcement of DoubleClick acquisition and the company has come out with two good quarters since then. With the company entering the 700 Mhz auction bid and the recent investment in the non renewable energy, the game never ends for Google.

Tailpiece - What could have been the impact on VCLK if FTC did not approve the Google-DoubleClick deal? Of the three companies mentioned earlier - aQuant, VCLK and 24/7 - only VCLK remains to be acquired. The speculatory sentiment on the stock has been so strong on ValueClick, that any upward move on the stock has been attributed to a potential buyout. FTC would have played the spoilsport for those who had a short position on the stock.

Disclosure: Author has no positions in any of the stocks mentioned