• by Wendy Davis  @wendyndavis, March 12, 2008

Google completed its $3.1 billion purchase of DoubleClick Tuesday, just hours after the European authorities gave the company the final clearance it needed for the deal.

With the merger, first announced almost one year ago, Google appears poised to claim a much bigger stake of the growing online display ad market.

"Advertisers and publishers who work with us have long asked that we complement our search and content-based text advertising with display advertising capabilities," wrote Google CEO Eric Schmidt in a post on the company blog. With DoubleClick, he wrote, the company can "bring advances to the market in technology and infrastructure that will dramatically improve the effectiveness, measurability and performance of digital media for publishers, advertisers and agencies."

While Google has not revealed specific plans for integration, some industry observers predict that the company will make it easier for marketers to both buy and analyze the performance of different types of online advertising.

Investment bank J.P. Morgan wrote Tuesday that it expected Google to merge its paid search platform with DoubleClick's tools for managing display campaigns to offer marketers a "comprehensive ad-management platform across all types of media."

The investment bank also predicted that Google can now leverage behavioral data gleaned from people's searches, e-mail, video usage and Web-surfing history to boost the price of ads sold on a cost-per-thousand-impression basis. "The company can monitor/track user behavior across a number of its publisher partners, providing targeted advertisements at the appropriate point of the buying cycle. If done right, we believe web-CPMs could grow substantially from their current levels," the report stated.

But that prospect--increased targeting based on data about users--continues to trouble privacy advocates who opposed the merger. Advocates fear that Google will combine its knowledge of users' search history with DoubleClick's data about what Web sites people visit to compile extremely detailed consumer profiles.

Even if such profiles are "anonymous"--or not tied to people's names and addresses--privacy advocates still worry that they will be detailed enough to reveal individuals' identities. Among other concerns is the potential for people to lose control over information they would prefer to keep confidential--such as medical conditions or financial matters.

"Advocates are going to press Google to adopt privacy policies that provide serious control of data and make the system transparent," said Jeffrey Chester, founder and executive director of the Center for Digital Democracy, which had opposed the merger. "They are not going to be able to escape the intense scrutiny or public interest lens."

Google has not yet elaborated on its plans for increased behavioral targeting, but Schmidt wrote in his blog post Tuesday that "users will continue to benefit from our commitment to protecting user privacy following this acquisition."

Despite the concerns of privacy advocates, not everyone thinks Google is looking to beef up profiling capabilities. David Morgan, founder of behavioral targeting company Tacoda, said he would be surprised if Google took steps to combine people's search histories with their Web-surfing behavior. "It might be technologically possible, but it's not likely," he said.

First, DoubleClick contracts with publishers forbid the company from sharing that type of data with others. Morgan said he thought those terms would apply even to its new parent company. Secondly, he said, merging that type of data would likely cause a backlash among policy-makers and advocates.

In addition, Morgan said, even when advertisers have access to people's search histories, they don't yet know the best way to use that information, and publishers haven't figured out a sales model for it. "Knowing what someone's looking for is another behavior that can be valuable," he said. "But the big question is, how do you sell it? How do you use it?"

The question could be academic if European authorities follow through on statements indicating they will impose restrictions on Google's ability to store or use records of people's searches. Last month, the European privacy regulators said that IP addresses were personal data, meaning that companies that collect them must follow Europe's privacy safeguards. The European privacy authorities are expected to issue a full report outlining new privacy measures next month.