Clients and agencies won’t be playing ball if Google scores with DoubleClick

FreytagGoogle is in the midst of an industry backlash. While its tentative steps beyond digital into the traditional arenas of television and most recently radio have ruffled feathers, it is the proposed acquisition of ad-serving company DoubleClick for $3.1bn (£1.5bn) that is causing the most consternation as observers question whether the move would provide the behemoth with access to an unprecedented amount of data on both advertisers and consumers.

As the world’s leading search engine, Google commands a near 54% share of US search queries, while in the UK it dominates with a 70% share. This strong position means it holds an invaluable amount of data in the search sector, but it lacks such knowledge in the graphical (display) sector online – until now that is with the possible acquisition of DoubleClick, which acts as a link between advertiser, agency and website/ publisher.

As news of a deal broke, a bitter Microsoft cried foul, saying the move would create a monopoly in the digital space, despite the fact it too had been in the bidding for DoubleClick – an irony lost on few observers. While in the US, Bill Gates’ technology company has come out guns blazing, its UK arm is staying tight-lipped on the subject, but many others are less coy. Sir Martin Sorrell, head of WPP Group (the world’s second-largest network), stepped into the fray at the weekend condemning the tie-up as one that would give Google access to an unprecedented amount of data. "It raises issues as to whether we are happy to let Google have our clients’ data and our own data which Google could use for its own purposes," he declared.

He is far from alone in having such concerns. Simon Mansell, managing director of TBG London, says: "Should the tie-up go ahead it would be pretty dangerous. For one company to have such a monopoly over data would not be a good thing. It already has a huge amount of insight into search activity, and by having access to DoubleClick’s data through its DART tacking technology it would have access to about 80% of the data on digital display advertising. It would not only know where traffic was being driven from but also know how and why ads convert."

Google rebuffs accusations the move would negatively impact advertisers and infringe consumer privacy. Nonetheless, lobbyists in the US are calling for the Federal Trade Commission to investigate the proposed deal and there is nervousness in the online ad sector.

The rise and rise of Google continues unabated. Earlier this month, the search behemoth reported net profits of $1bn (£500m) in the first quarter of 2007, a 69% increase on 2006. Revenue rose 63% to $3.66bn (£1.83bn), with revenues from the UK reaching $578m (£288m) or 16% of revenue in the first quarter of 2007. With DoubleClick this growth would continue apace and, whatever their stance, most observers say the deal makes sense for Google.

The Search Works chief financial officer Stephen Rust says: "You can see why Google wants the tie-up: it’s a marriage made in heaven, leveraging it from the search to the graphical space. There’s no doubt it’s a high price tag, but if it can justify it from a strategic perspective it’s cost-effective."

Blake Chandlee, director of media sales for Yahoo! UK & Ireland, agrees the move makes sense as Google has little presence in display – after all display was a medium it initially shied from but in which it now sees huge growth potential. He says: "We welcome the competition. Google is playing catch-up in display. It’s also looking to other areas, but so is everyone. We are all eyeing new revenue streams as the media landscape changes dramatically. It’s taken Google some time for it to get its arms around display – we’re still the biggest player and we’re not afraid of competition."

But if Google gets the go-ahead to buy DoubleClick, the consensus appears to be that any competition will be eradicated. "Be it publisher, agency or advertisers, there is cause for concern – any move to give more power to Google is questionable," says Richard Dunmall, senior vice-president and managing director of Atlas Europe, the ad-serving network and DoubleClick rival. However he adds: "Such a move would be good news for Atlas, as it means our position as an independent viable alternative to DoubleClick is strengthened."

He says that since news of the Google/ DoubleClick merger was announced he has received a number of calls from both advertisers and agencies concerned about the implications the move has for them. Dirk Freytag, chief executive officer of AdTech, another ad-serving platform, says he too has been contacted by advertisers anxious that Google will have too much knowledge and power. He agrees that few advertisers or ad networks will be happy and says: "Google will offer, as it has offered before, small and medium-sized businesses free technology to encourage take-up. It’s a model that’s worked in the past and this will be one way it can move into the market. But dominance is not in the interest of advertisers and we have already seen clients show concern."

Indeed TBG’s Mansell says if the deal goes ahead he would not use DoubleClick’s DART to serve clients’ ads as he would be unhappy about one company having such a cache of information about his clients.

As The Search Works’ Rust says: "If the deal goes ahead it will be very interesting to see how it makes it work. How will Google satisfy people that it is using the data appropriately – from both advertisers’ and users’ perspective? It’s unclear how advertisers will respond to Google taking a larger slice of the digital pie, while other search engines are unlikely to be happy about their data feeds being sent via Google. It needs to reassure the market. Perhaps strategically it’s on target in terms of its own growth but it has a huge PR and marketing task on its hands."

Mansell agrees and along with many observers draws parallels with Microsoft: "Google must be careful. It’s experiencing a golden age just as Microsoft did, but it, too, must be wary of complacency."

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