Bronte Media

Ad Serving didn’t matter 2.5 years ago when Doubleclick was taken private by Hillman and Friedman for $1.1bn. At that time, everybody under the sun looking at the stock saw pricing of the company’s products decreasing by 10% a year and a huge number of competitors offering Doubleclick’s core ad serving product for much less and some for free. The market was being disrupted.

Surprising was Google’s interest in buying the firm for nearly three times as much a short time later. More surprising is government scrutiny over a deal that is completely inconsequential in the scheme of the online advertising industry. And even more surprising is the stupidity of Microsoft trying to gain scale in the financially worst parts of the online advertising value chain.

Ad serving is going to zero. Maybe even negative (i.e. the vendor pays the client) now that Microsoft is drunk. It is a business that reached the end of its life some time ago.

Instead, ad targeting is still rich with innovation and is not a commodity. It most likely wont be a commodity for some time. That is because the industry will always be trying new strategies to achieve greater efficiency.

Doubleclick achieved a great deal, lead the industry in the early years, sold itself for a steal the first time around but the value of the company lies in the strategic position it holds in the industry and the ability of the company to leverage that position into ad targeting. The ad serving piece is only worth the price of the option to enter new tangential markets. I think a parallel analogy is almost if etrade.com had to become a Merrill Lynch.

So its surprising that the Government cares and that Microsoft cares.

Maybe the most valuable thing to come out of Google’s attempts to acquire Doubleclick is the incredible headfake that has lead Microsoft down a deep and dark rabbit hole of online ad obscurity.