Google owns the world’s main search engine, it operates the most important video-hosting service in YouTube, and its fashionable internet browser, e mail, map and assembly software program is utilized by billions of individuals.
However its monetary heft — the supply of almost all its huge earnings — is promoting. And maybe no day was extra pivotal in remodeling Google right into a powerhouse throughout the whole digital promoting business than April 13, 2007, when the corporate clinched a deal to purchase DoubleClick for $3.1 billion.
The deal turned out to be “a complete sport changer, an important piece within the bigger jigsaw puzzle Google put collectively,” mentioned Timothy Armstrong, a former Google government who championed the acquisition.
It has additionally turned out to be a basic instance of why a rising variety of antitrust consultants say lawmakers have to broadly rethink how mergers are regulated when the customer is a tech firm with sturdy and rising market energy.
Google’s advert enterprise is now a spotlight of wide-ranging investigations by the Justice Division and state attorneys common. The scrutiny contains whether or not the corporate choked off opponents, or shortchanged advertisers and publishers, and the way it assembled its advert empire, together with DoubleClick, an advert expertise firm and market.
The Justice Division is predicted to file an antitrust swimsuit in opposition to Google by the top of the month. It’s unclear whether or not the case can be centered on the advert enterprise, or focus on renewed allegations that Google’s search algorithm offers desire to its buying and different commerce companies and hobbles rivals.
That inner debate, many consultants say, factors to the problem going through antitrust enforcement in a fast-moving, complicated tech enterprise: Investigations are troublesome, lengthy and backward wanting.
As an alternative, these consultants say, the nation wants a extra pre-emptive method, making it far more troublesome for giant tech companies to purchase different firms — and maybe forcing spinoffs if a previous acquisition took out a nascent competitor or turned a brief reduce to larger market energy. In different phrases, altering the regulation in order that Google wouldn’t have been capable of purchase DoubleClick.
The Federal Commerce Fee, which evaluations many mergers, permitted the DoubleClick deal in a 4-to-1 vote. William Kovacic forged one of many 4 assenting votes.
“If I knew in 2007 what I do know now, I might have voted to problem the DoubleClick acquisition,” mentioned Mr. Kovacic, now a regulation professor at George Washington College who’s among the many consultants pushing for stronger merger oversight.
In Senate testimony final week, Donald Harrison, Google’s president of world partnerships and company growth, described the DoubleClick deal and smaller ones in digital promoting as “discovering a bit of expertise” that the corporate then invested in and strengthened to speed up innovation.
On-line advert costs, Mr. Harrison mentioned, have fallen over the previous decade, and it’s a extremely aggressive market.
DoubleClick had a beneficial asset: its enterprise relationships and ad-serving expertise utilized by hundreds of publishers on-line.
In 2007, Google was a tenth of the scale it’s at present. Nonetheless, it was a surging firm and a heavyweight in search and in search promoting, with $16.6 billion in income. And it was headed for the enterprise the place DoubleClick made its dwelling — bigger show adverts on web sites and video adverts. Google, for instance, was gifting away software program instruments that DoubleClick had charged for. To diversify, DoubleClick created an advert change, or market, as a brand new enterprise and a buffering income.
“However we have been terrified,” recalled Michael Rubenstein, a former DoubleClick government. The DoubleClick managers and buyers determined it was a superb time to promote.
The public sale for the corporate got here down to a few finalists, Yahoo, Microsoft and Google, mentioned David Rosenblatt, a former chief government of DoubleClick. The three bids have been related in worth, he mentioned, however Google, given its thriving search enterprise, had entry to the most important pool of advertisers, complementing DoubleClick’s power with publishers.
“The mixture with Google made probably the most sense,” Mr. Rosenblatt mentioned.
The Federal Commerce Fee gave Google the go-ahead to purchase DoubleClick by December 2007, as did the European Fee just a few months later. Wanting again, Mr. Kovacic mentioned a authorized problem to the deal would have been “troublesome however not unattainable.”
One other former commissioner mentioned a merger overview was a prediction of whether or not competitors might or might not end result. However he added that it was an informed guess, made by regulators grounded within the current. Nobody foresaw the ability that tech platforms like Google, Fb and Amazon would amass, mentioned the previous commissioner, who requested to not be recognized due to potential conflicts with purchasers of his agency.
In its 2007 assertion permitting the DoubleClick deal, the fee described broad swaths of the digital advert market as “comparatively nascent, dynamic and extremely fragmented,” including that different massive firms “seem like properly positioned to compete vigorously in opposition to Google.”
Microsoft, it appeared, could possibly be a formidable rival. Only a month after Google introduced the DoubleClick deal, Microsoft agreed to pay about twice as a lot — greater than $6 billion — to amass aQuantive, one other digital advert firm.
On the time, aQuantive primarily appealed to Microsoft as a competitor to Google that might sluggish its growth plans in promoting. Microsoft noticed Google as its most harmful rival as a result of it posed a menace to Microsoft’s lifeblood merchandise, Home windows and Workplace, former executives say. Google was providing free variations of e mail, doc and spreadsheet applications over the web, backed by promoting.
“With DoubleClick, Google was enjoying offense, however aQuantive was a defensive transfer for Microsoft,” mentioned Brian McAndrews, the previous chief government of aQuantive. (Mr. McAndrews is a member of The New York Instances’s board of administrators.)
For Microsoft, aQuantive was by no means actually a precedence, former executives say, and its leaders departed and it withered. In 2012, Microsoft publicly conceded that the deal had failed, taking a $6 billion write-off.
Whereas DoubleClick was its largest deal by far, Google constructed up its advert expertise enterprise with a string of acquisitions. It purchased start-ups that made software program for publishers, advertisers and cellular adverts, together with AdMob in 2009, Invite Media in 2010 and AdMeld in 2011.
These constructing blocks and its in-house improvements have given Google a robust presence in each step of shopping for and promoting on-line adverts.
“Google has put all of it collectively,” mentioned Jeffrey Rayport, a web based advertising and marketing knowledgeable on the Harvard Enterprise Faculty. “Google is the market beneath one roof.”
Google’s one-stop store is a big comfort for the smaller companies that generate a lot of the tech large’s income and would not have internet advertising experience. However the Google machine can seem to be a fortress to advert tech firms searching for a slice of the market.
In 2007, with massive firms scooping up digital advert properties, Brian O’Kelley noticed alternative. He left Proper Media, which Yahoo had simply purchased and the place he had been chief expertise officer, and based AppNexus.
His advert tech start-up was meant to be an unbiased intermediary for advertisers and publishers, an alternative choice to the rising powers of digital promoting, Google and later Fb.
By 2010, the start-up was gaining momentum and attracting consideration. That October, Microsoft led a $50 million spherical of enterprise funding in AppNexus. A month later, Mr. O’Kelley mentioned, AppNexus was reduce off from DoubleClick, simply as the height vacation advertising and marketing season was getting underway.
“They nearly killed us,” Mr. O’Kelley recalled.
Google mentioned it couldn’t touch upon dealings with particular clients like AppNexus. However Google mentioned that it had insurance policies on “advert high quality, advert content material and malware” and that violations generally led to suspending entry to the DoubleClick advert change.
The problem, Mr. O’Kelley mentioned, was a technical one: Google’s software program attributed adverts it mentioned violated its guidelines to AppNexus reasonably than to the advertiser.
When the AppNexus cutoff raised alarm within the advert business, Google issued a press release calling AppNexus “an important accomplice” and saying the 2 firms have been working to resolve the matter.
The issue lasted just a few weeks, a brief blow to the start-up. The message Mr. O’Kelley and his crew took from the episode was that working a enterprise within the Google advert ecosystem could possibly be precarious and unpredictable.
Over the following a number of years, AppNexus struggled at instances, however it persevered and emerged as an alternative choice to the Google market. In 2018, AT&T purchased AppNexus for $1.6 billion. AT&T executives spoke of the corporate as a linchpin in AT&T’s imaginative and prescient of making a tv and digital video promoting change that may be a counterweight to Google and Fb.
However these ambitions have been scaled again, and the main target turned utilizing AppNexus to supply one of the best advert tech for AT&T’s Time Warner tv and video items, together with CNN, TBS and TNT. This month, The Wall Avenue Journal reported that AT&T was trying to promote its digital advert unit.
Issues may look completely different at present if the Federal Commerce Fee had made a unique determination in 2007, mentioned Mr. O’Kelley, who left AT&T in early 2019.
“Had DoubleClick not gone to Google,” he mentioned, “it’s not clear that Google would have been the ability it turned — definitely not as simply.”