Is Google DoubleClicking its way to dominance?

Rarely do Microsoft (MSFT) and Yahoo! (YHOO) join hands on an issue, but when the firm on the other side is Google (GOOG), they are more than happy to do so. Ever since Google announced the $3.1 bn takeover of DoubleClick, the two software giants have been crying foul over the control it will give Google over Internet advertising.

While Microsoft - who also wanted to buy DoubleClick - is playing the role of the peeved loser pointing to anti-trust violations (no stranger to being the target of anti-trust accusations themselves), Yahoo seems more concerned about the future of advertisers on the web. To paraphrase, both companies are running scared of Google's latest attempt at dominating the webosphere, where it already holds sway with search (paid or organic). The fact of the matter is that Google’s purchase of DoubleClick would combine the two largest online advertising distributors from two dominant advertising channels (search and display ads) and thus substantially reduce competition in the advertising market on the Web - a shrewd move indeed by Messrs Schmidt, Brin and Paige.

Having spent the best part of the last two years on internet marketing analytics and having worked with both Google and DoubleClick, I can clearly see this being a seminal move. Here are the reasons - Google is the 800-pound gorilla in online advertising (It owns 56% of the core U.S. search market; Microsoft - 12%; Yahoo 23% - as of July 2007) and this merger doesn't change that. But at the same time, this deal clearly has the potential to ignite Google's efforts in the display ad market and down the road gives them the opportunity to create a platform that marries search and display ads in a way that it will be hard to fathom others imitating. Even the sky high price may be less a function of DoubleClick's current worth and more about what it can strategically provide for Google—and what it could have done for Microsoft or Yahoo!

Google seems to be following the most successful adage in business - "If you can't make it, buy it". Google's display efforts to date, like its attempts to expand outside of search in general, have been marginally successful at best. So in a lot of ways, it had to do acquire a company like DoubleClick. But what was surprising to me was the aggressive approach taken by Google towards dominating the industry - while it could have easily and conservatively sat on its riches from search, it decided to expand its horizons and give it rivals something more to think about.

As the legal battles and corporate counter-strategies unfold over the next few months (Microsoft has since announced the $6 bn purchase of DoubleClick's rival aQuantive), I can but only sit and admire a company that simply doesn't want to lose anything - not even a market share it doesn't have!