Commentary

DoubleClick Deal: It's All Questions Now

You will have a hard time finding anyone in the online publisher world who has been a bigger supporter of both DoubleClick and Google over the past decade than me.

At washingtonpost.com under my watch, we were one of Google's first publisher partners well before they had figured out a business model. I continue to rely on them happily today in my new venture, www.healthcentral.com, and personally use Google 100 times a day.

I've been a loyal and thrilled DoubleClick customer for just as long, having switched out of other services twice, and being one of their most evangelical reference customers.

But as a long-time industry participant, analyst, and pundit, I do have a few questions when you put 'em together, and here are my top seven:

1. Has this combination effectively declared war on ad agencies?

One very smart friend of mine in the agency world feigns indifference. "Anything that brings efficiency at the tool level is a good thing. It's an operating system, and the world doesn't need countless operating systems." Maybe. But unlike any other enterprise software company, Google/DoubleClick now is an "operating system" which has billions of dollars worth of direct, and competing, relationships with marketers. Put it another way, over time, other than "creative" advice what would agencies offer that Google/Doubleclick would not?

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2. Might the anti-trust issues stick?

Despite the glaring irony of Microsoft suing anyone over anti-trust, they might have a point. Eric Schmidt suggests that there are many alternatives for folks, but as a publisher I'd like to know who he has in mind. At the end of the day, most publishers simply want to assume ad serving works -- is the accounting right, do the ads serve accurately 99.99999% of the time -- thus the cost to switching is extremely high. I suppose like a few of the portals and CNet we could build our own, but I doubt the regulators consider that "competition".

3. As Google has launched its display version of AdSense, how will DoubleClick publishers cope with sales channel conflicts?

At one level, a combined Google/DoubleClick offering could offer unique inventory load balancing capability -- whenever a publisher runs all that it sells directly, it can fill inventory with Google ads. But what does that mean when NYTimes.com and Google have the same relationships?

4. If sales channel conflicts are not resolved, is interactive display advertising pricing now destined to drop?

By its total mass and targeting capabilities, Google is able to deliver effective CPMs to publishers through AdSense which are impressive, and they are well below general CPMS. Why would this not continue, and increase pricing pressure?

5. What fire walls, if any, will there be between DoubleClick publisher audience data and Google's?

Google will have incredible insight into the ad sales/inventory of every publisher that uses their combined tools. Is this a good idea? Will publishers balk or rebel?

6. Are small ad network/rep firms dead?

Given the ease, efficiency, quality of brands and relative pricing of Google for small publishers, what is the future of Burst, Tacoda and the mom and pop shops?

7. Are larger ad networks commoditized and also subject to pricing pressure?

To watch the stock market today, these companies have been rewarded. But that may be the halo effect of a big price for DoubleClick. If you were AOL -- which uses Doubleclick for its ad-serving and sank a fortune into advertising.com -- are you sleeping better or worse tonight than a week ago?

Let me tell you, any time one can consolidate a growing industry with less than 2% of one's market cap one should do it every time.

And while Yahoo and MSN are hardly out of the running, they are going to eat more dust than they expected from the "shock and awe" of this deal if, for no other reason, they couldn't get their hands on a significant strategic asset for themselves.

Forgive me for falling back on my Washington experience here, but if we've learned anything about "shock and awe" in recent years, it is this -- its extraordinary short-term dominance can be dwarfed by longer-term unintended consequences.

The answers to my seven questions will shape our industry for the next decade.

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