A year ago, Google (NSDQ: GOOG) shares were only moving upwards, and its planned acquisition of DoubleClick was a step ahead of the subsequent online ad buys of its rivals. Since then: Google has been proven mortal, and its rivals got their deals done while GoogleClick remained in regulatory purgatory. Now that the deal is consummated, Google has made clear that it intends to press the pedal on display advertising, in hopes of making up for some softness in its core business. In a new report, Lehman Analyst Dough Anmuth analyzes the prospect, and what DoubleClick offers Google:
-- Raw numbers: Anmuth forecasts DoubleClick revenue of $300 million for 2008, and EBITDA of $50-$60 million for the year. At the deal's ultimate price tag of $3.24 billion, earnings for the year will be slightly diluted, on the order of about 1 percent.
-- Strategy: Google stands to benefit if it can convince DoubleClick's display advertisers to invest more money in Adsense for Content. Conversely, DoubleClick has relationships with premium publishers. This is the opportunity: "...for DoubleClick to be a true game-changer for Google, Google will need to be able to successfully leverage DoubleClick's relationships on both the buy and sell sides of online advertising."
-- Competition: Yes, during the past year, Microsoft (NSDQ: MSFT) and Yahoo (NSDQ: YHOO) have done lots of buying on the online ad side, but now they've given Google a gift: a possible merger distraction. Ultimately, a tie-up between the two could create a competitor with some verve in this area, but they're going to be tied up for awhilegiving Google a chance to make up for lost ground.
-- Ad quality: Following the latest quarterly report, there's been a slew of claims that Google's core text ad business is slowing down. Anmuth argues that it has a lot to do with intentional improvements in ad quality and that the key to making the DoubleClick buy successful will be the ability to convince DoubleClick advertisers that Google's slate of ad options offers the best yield for their ad dollar.
By Joseph Weisenthal