• Internet Outsider, Monday, April 16, 2007 10:45 AM

Internet outsider Henry Blodget says Google's proposed $3.1 billion purchase of DoubleClick from private-equity firm Hellman & Friedman is a bargain--unlike, say, the expensive, complicated YouTube buy. "What's it worth to fix your display-advertising problem, corner the market for the 'advertising operating system,' and deliver a hammer-blow to an already prostrate Seattle-based competitor? At "only a few quarters of free cash flow," $3.1 billion is a small price to pay.

Google is already the undisputed king of text-based search and contextual advertising through its AdWords and AdSense programs. With the addition of DoubleClick, Google would now control the vast share of the market for graphical advertising, too--not to mention even more information about Web users to sell to advertisers. "For those with an eye on the really-long term," says Blodget, "it's hard to see how this isn't good news."

However, for stock speculators, it could be bad news in the near-term. Investors and analysts would factor the hefty all-cash buy into Google's earnings forecasts, though in addition to lowering margins, the integration of DoubleClick will prove to be a significant management challenge. Then again, Google, in its IPO prospectus, never made it a secret that the company isn't focused on the near-term.

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