GOOG/DCLK: Will it Grow the Pie?
I would like to focus instead on if the deal will grow our industry. For starters, I think that the deal is a fundamental one for our industry. It touches too many market participants for it not to be. There is hardly a publisher, advertiser or agency that doesn't have some direct or indirect relationship with either Google or DoubleClick. On that score alone, it will be big.
As to how it will impact participants in our market, I would like to offer a somewhat contrarian view. I think there's a good chance that this deal may produce far, far more winners than losers. In fact, there is a very good chance that it will actually help grow the businesses of Google's existing and future competitors more than it will hurt them. Quite possibly, years from now, we could look back and find that this deal set a number of things in motion that grew the businesses of not only Google, but also Yahoo, Microsoft and AOL -- as well as thousands of smaller online media companies.
Google buying DoubleClick and creating a powerful display ad platform might actually serve as a catalyst for growing the entire online advertising pie. How is that possible? Isn't this deal really about one giant fighting it out among others, each competing to amass assets to grow market advantage over each other? While I am certain that those issues were primary motivators for the bidding up of the DoubleClick business, I don't think that a "share wars" framework is the best way to analyze the long-term market impact of this deal. Here are some reasons why:
Attention. All too often, we in online advertising forget that we are playing in our own little world. As much as we think that we are cool and that we are changing the world of marketing, this view is not uniformly shared by the people who pay the bills, the traditional marketers and their agencies. For many of these folks, online as a brand advertising channel has been an "interesting" development, but certainly not yet either an "essential" or "fundamental" one.
Well, a deal like this, and what might follow -- a larger, more efficient and effective platform for the purchase and delivery of online display advertising -- is probably just what we need. The deal, and the new products and services that Google follows up with, could very well catalyze the growing momentum that online adverting has been developing for years -- which could really propel us into a bigger market faster. Google did it with search -- how big would the search ad market be without this major player -- so why not display?
Competition. Google's power scares people. It scares the company's competitors. Some may turn and run, but most, I believe, will redouble their efforts and compete. Google and DoubleClick together raise the bar. The days of blasting out billions of banner ads without precision targeting or frequency caps -- and without providing detailed reporting on audiences, their behaviors and their subsequent spending patterns -- are numbered. Everybody's game will have to get better. Marketers and advertisers will win, and they will spend more of their television dollars online sooner.
Efficiency. As the company did in search, Google is likely to use DoubleClick to make it much more efficient to buy online display ads. We know that the "friction" costs of the display ad buying process today hold back a lot of potential online ad spend. We need a more efficient market for buyers -- and this efficiency has to start somewhere. If it needs to start with Google, so be it.
Leapfrogging. With attention, competition and efficiency, we will see a number of companies focused not on doing the exact same thing as Google, but doing it better. Rather, we will see (and already are seeing) a wave of companies developing platforms that will leapfrog Google and other incumbents. These developments are happening in video, mobile, ad exchanges, behavioral, and word-of-mouth. Google may use DoubleClick to win round one of the online display ad market, but there are a lot of companies spending billions of dollars in an attempt to win round two.
Ultimately, Google is speeding up the development of a market that many of us would like to be a bigger part of. Google just turned it up a notch. The issue now, for everyone in the game, is "if you can't run with the Big Dogs, get off the porch."