M&A Craze in Ad-Servers: Less Choice for Publishers
Search advertising has ballooned to epic proportions; Google’s success is proof of that. Yet online display advertising still has potential for big-time growth, and a number of players, from private-equity firms to technology companies, roiled the market this spring by scooping up ad companies such as DoubleClick, aQuantive and 24/7 RealMedia. In fact, some $12 billion was spent in four weeks from April to May in a series of acquisitions on companies that specialize in serving up display advertising online.
"The online ad market is hitting critical mass and most large players are expecting it to explode," says Dave Morgan, founder and chairman of Tacoda, an online behavioral targeting advertising network.
Google scored big with its $3.1 billion purchase of DoubleClick, a deal that signaled an imperative to bolster search advertising with display; the price is a reported 20-times DoubleClick’s revenues of $150 million. For others, it was buy now or watch values soar. "An ever-growing proportion of advertising in all media will be sold via an electronic marketplace and the question is, who will own it?" says Jeff Jarvis, media consultant and blogger at Buzzmachine.com.
And as companies recognize the value of the infrastructure that supports online display advertising, further efficiencies will be developed. But content owners shouldn’t stand idly by and let their priorities become subordinate in the marketplace. "This is all good news for premium content publishers," says Morgan. "A more efficient marketplace will mean more money for all. Of course, few of these companies will totally control their own destiny here. They will have to rely on networks for a significant part of their future revenue. The game in the future is shaping up to be one where massive scale and precise targeting are the price of admission for online brand dollars."
But content owners need to get in the game by creating scale through partnerships. "Publishers are standing back and letting others try to do this. Is that wise?" says Jarvis. "I’d say they should learn from the experience of newspaper publishers, who couldn’t stop squabbling long enough to form their New Century Network consortium and have since ceded control of billions of dollars in national and regional advertising as a result."