News

Microsoft Warns of Google-DoubleClick Danger

• By Keith Ward
• April 17, 2007

Microsoft released a statement by Brad Smith, Microsoft senior vice president and general counsel, that is nothing less than a warning shot across Google's bow. The statement, released on Microsoft's Web site, reads:

"This proposed acquisition raises serious competition and privacy concerns in that it gives the Google-DoubleClick combination unprecedented control in the delivery of online advertising, and access to a huge amount of consumer information by tracking what customers do online. We think this merger deserves close scrutiny from regulatory authorities to ensure a competitive online advertising market."

The irony is that Microsoft was one of the companies, along with Yahoo and Time Warner, jockeying to buy DoubleClick, an online ad management company. The sale, which is expected to be completed by the end of the year, has been approved by both companies. The price is reported to be $3.1 billion in cash.

That was apparently too steep for Microsoft and the rest of the competition, given DoubleClick's value. The Wall Street Journal, in an article quoting knowledgeable sources, pegged DoubleClick's revenues last year at about $150 million. When word leaked out that DoubleClick was for sale, the owners, San Francisco private-equity firm Hellman & Friedman, were seeking about $2 billion for the company. Even that lower price was too steep for Microsoft to pay.

Don Dodge, director of business development for Microsoft's Emerging Business Team, said on his blog regarding the lower, $2 billion sales price: "Maybe 20 times earnings would make sense, but 20 times revenues? You have got to be kidding."

Google wasn't kidding and, if the revenue estimates are correct, paid about 30 times revenues for DoubleClick.

A further irony in Microsoft's statement is that it reads very similarly to lawsuits that have been filed against the Redmond giant over the years. Competitors have complained for decades about Microsoft's supposed stifling of competition and desire to monopolize the market, which has caused the U.S. government and the European Union to slap Microsoft down and regulate what software it bundles with its Windows operating systems.

Google, for its part, is on a serious buying spree. The potential deal for DoubleClick comes on the heels of Google's purchase of YouTube last year for $1.6 billion.