DoubleClick, Google, Microsoft, Hellman & Friedman

Google snatches away DoubleClick from Microsoft. At this price, it is a defensive move to keep Microsoft from getting a greater foothold in online advertising (we originally saw prices of $2B or so bandied around), but kudos to Hellman and Friedman who bought the compay for $1.1B in 2005 when it was not obviously underpriced. Very impressive on their part. The sale was for 10x revenue (!)

Google reached an agreement Friday to acquire DoubleClick, the online advertising company, from two private equity firms for $3.1 billion in cash, the companies announced, an amount that was almost double the $1.65 billion in stock that Google paid for YouTube late last year.

Brief blurb at Dealbook.


More analysis from Paul Kedrosky .

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

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.

Posted on April 13, 2007 and filed under Online Media, Finance.