Google is set to earn some $6.3 billion in net US online ad revenues in 2007. Meanwhile, total US online ad revenues are likely to reach $19.5 billion. Many economists define a monopoly as a company that controls 25% or more of a given industry. So, with the announcement of its purchase of DoubleClick, has the monopoly player just sealed the deal on its control of the market?
Before the DoubleClick announcement, Google’s position of strength had already prompted BusinessWeek to ask "Is Google Too Powerful?" in its April 9, 2007, cover story.
There is no doubt that Google has sought to grow its revenues and defend its position of strength. However, the DoubleClick purchase is not solely about buying display advertising revenue. The longer-term play is more about acquiring deeper relationships with large publishers and advertisers.
While Google has relationships with hundreds of thousands of online advertisers — from top corporations to a slew of mid-size and small companies — DoubleClick has relationships with thousands of large Web publishers. Together, Google and DoubleClick will create a robust one-stop shop for all types of online advertising purchases.
There can also be little doubt that part of Google’s motivation rests on the fact that these relationships will be a forerunner to increased Web video advertising earnings. The large DoubleClick client base consists of just those brand marketers who will be among the first to invest larger budgets in online video over the next few years.
eMarketer currently stands by its projection for US online ad revenues for the next few years, projecting a total which will grow steadily to reach $36.5 billion by 2011.
The DoubleClick purchase may well have an impact in Google’s favor on the distribution of these revenues between the key players.
However, eMarketer is not going to quickly jump to that conclusion. If, as is highly likely, Google also bought DoubleClick for the data it will now get from display advertising, it could end up harming its revenue growth over time.
On the one hand, access to ad-serving performance reports from competitors such as AOL and MSN would give Google very useful industry intelligence. But, on the other hand, unless this is handled with the utmost care, these same publishers could grow quickly wary of Google’s dominance and pull their business from DoubleClick once their current contracts expire.
One trend that is clear is that Google’s aggressive pursuit of growth in the online advertising space will see more bold ventures by other players, both in partnership with Google and as challenges to the search giant.