Valueclick’s stock price trended up after the Doubleclick acquisition by Google. When I saw this I thought, “that’s not that surprising, it seems like the market would react positively to anyone related to online advertising after such a large purchase price.”
But then when I see financial writers making claims like “Valueclick is the better Doubleclick”, I have to say something.
Valueclick has had a nice run, and as the writer points out that have some nice financial numbers. But the Google acquisition of Doubleclick at such a price is based on more than the raw revenue and profit of Doubleclick. It’s based on strategy. Valueclick is SORT OF like Doubleclick in the sense that they both do have ad serving business units, and they both have affiliate business units. However, Doubleclick’s ad serving business is much larger with a much higher quality client base. Valueclick’s media business which got a big boost when they bought Fastclick drives a lot of their revenue. This is entirely different from Doubleclick.
Doubleclick has deep technology relationships and integration with the best advertisers/agencies and web publishers. While they might not extract the most revenue possible from these parties due to their technology, Google was paying such a premium because of these relationships and because of the potential for Doubleclick to put together an ad exchange based on these relationships (harder to execute than they might think). Those deep technology relationships are not dropped easily.
Valueclick on the other hand profits from operating mostly as an ad network. A relationship that is all easy for publishers and advertisers to drop at any point in time. Buying Valueclick would not give Google or Microsoft or Yahoo the deep relationships with top advertisers and publishers that buying Doubleclick provides.
This is not to say Valueclick isn’t a successful company, that’s not what I’m arguing. But it’s not really accurate to relate the two that closely, and it’s not accurate to label them as the better Doubleclick.
Agree that ValueClick is no DoubleClick.
However, your argument about ad networks being a relationship that is dropped very easily leaves me with the question: Who is the better Google?
What is Google if not an ad network? Then, wouldn’t their relationships be easily dropped?
In essence, then what you are saying is that although Google’s biz performs better than DoubleClick’s, DoubleClick’s biz is better because it’s deeper?
There’s much buzz about ValueClick being ripe for the picking now that DCLK is off the table. This speculation is mis-guided and it’s important to understand why.
aQuantive (AQNT) becomes of more interest given its similarities (Performics is to DCLK as AvenueA/Razorfish is to AQNT).
With the addition of Performics (a unit being all but completely ignored by analysts), GOOG will begin to resemble aQuantive with a twist — GOOG will carefully balance self-service ad management tools (aimed at advertisers direct AND agencies) with high end marketing services (via its Performics unit which looks a lot like AQNT’s AvenueA).
This serves all advertisers… those who value self-service scale and those who need full blown agency services. Many are suggesting that this isn’t possible but I beg to differ.
Precisely, Pat. VCLK’s ad management tech (market penetration, relationships) cannot rival Doubleclick’s. You’re the only one to nail this so far.
Hi Ron,
Well, Google is an ad network, and a VERY powerful one. Yes, Adsense and Adwords relationships with Google can be dropped very easily, but they have such a dominant position in that space and much less competition than Valueclick has in their space. Valueclick also does not share the same dominance.
Google is strengthening their general ad game by buying DCLK which has deeper relationships. So Google is protecting their ad network business that is so valuable to them by most likely trying to integrate their ad network with the deeper ad serving relationships.
Thanks for the nice comments Jeff.
I think you’re overestimating the potential of DCLK’s planned exchange–it’s aimed at the wrong part of the market. Larger publishers won’t go for an exchange because it dilutes the premium sales channel. Advertisers won’t go for DCLK’s exchange because in order to attract publisher inventory, DCLK is offering an exchange lite–limiting transparency by allowing publishers to sell inventory anonymously.
You’re also ignoring the organization integration challenges (1200 DCLK employees), tons of technology integration hassles, data segregation and compliance issues, and the conflicts of interest involved with this acquisition (e.g., how can they possibly keep the Performics SEM–which, btw, is no Avenue A/Razorfish). It will be very hard for Google to keep 100% of what it has bought in terms of relationships, imho.
As for relationships, VCLK has plenty among advertisers and is close to the top of the ad network daisy chain for a lot of important publishers. Sure, these relationships are not as well “integrated,” but we’ll see how integrated DCLK is once publishers begin excercising the change of control provisions in their contracts.
Let’s try to remember what DCLK was like about 24 months ago: a sinking ship. I had a friend who worked there in inside sales around that time, and it was pretty obvious they had major issues. The business has supposedly improved since then, but most people I talk to tell me that they are continuing to lose market share to Atlas on the agency side and Open AdStream on the publisher side. I guess we’ll see if GOOG can change that.
VCLK has never been an innovator. They buy their technology and spend the vast majority of their engineering resources on integration and maintenance. From an outsider they appear to be solid but my contacts inside tell of a different story. DCLK was for the longest time the market leader in ad serving but they faltered back in 01 and never recovered. I personally believe that the Google acquisition was not based on the relationships nor based on their technology but a strategic one that is more of a bluff. By showing the world that they are dead serious about controlling all aspects of advertising online they have positioned themselves on top of the pile.
Relationships are key in this business but the most important aspect of any ad relationship is performance.
Only time will tell if Google and their plan will work but one thing is for sure they are scaring the hell out of the market.
Google is after the branded advertisers and large scale publishers. They have the small to mid size market wrapped up IF they are able to migrate the larger players over to their services they will control the vast majority of ads online. Whether this works in their favor over the long haul is difficult to assess but in the coming months and years it will not be a good thing for mid tier companies like ValueClick
Hi Rob,
Actually, large publishers do and will participate in an exchange. Being that I work for Right Media, I know our client list and there are many large publishers on it who are participating in our exchange at large volume levels. Not only has our exchange raised their revenue on unsold inventory, it has had no negative impact on their premium sales channel.
I do agree that not giving more transparency could hurt DCLK’s exchange offering.
I also agree that integration is a large challenge, but not an insurmountable one.