Hmm... After reading a few articles around the place, like this one, I'm semi worried about Google's purchase. I can see that there might be "some" gain from the resulting relationships that will be forged as a result of the purchase, and of course the strategic advantage over Microsoft, but with Google's policy of "do no evil" who is to know how or if they would exploit such a strategic advantage. The biggest thing that is of concern to me is the that there seems to be a general vibe on the net of "money is everywhere and there are big chances just around the future and we need to get in now to take advantage of them". It would seem that some individuals and companies are, just like in the first dot com crash, throwing their money around and buying up big - without making purchases based on core business and economics principles like ROI. DoubleClick sold for 1.1B two years ago I find it hard to believe that a 200% growth in sale price could be justified over only two more years of operations without significant change in their business structure or position. I mean their annual turnover is only like $150M/year - sure that's a lot but it definitely doesn't justify the $3.1B spent to acquire it from a business or economic sense. Google seem to be splurging and paying for DoubleClick's "potential" or their belief they can leverage their resource for a much more significant return. This is all probably based on the assumption that the investment in online advertising dollars continues to trend as it has been over the last two or three years. I guess the next issue is, was this purchase REALLY needed. I mean Google "is the internet", and by that I mean when people think of the internet they think Google. I find it hard to believe they couldn't already leverage their massive presence online to launch their own alternative. I mean as far as I can tell there has been no mention of any significant intellectual property gained as a result of the purchase, except some relationships, that couldn't have been developed in-house or gained naturally. I dunno... Google's recent high profile takeovers make me a bit nervous because I think that there may be a bit of a mini bubble brewing again - and increased levels of acquisitions and mergers are normally a sign of peeking in the economic business cycle as a lot of business look to invest capital accrued from the recent years of economic profit from the upward swing in the economic cycle. That said, if there is a bit of a bubble forming in the online industry, I don't think it's subsequent pop will be anywhere as dramatic as the first as it would seem that the vast majority of online investment these days is based on solid business principles. Anyway I just think that it is takeovers such as these that makes me think that we are currently in prosperous times and that companies are cashed up and looking to throw a bit of money around without necessarily basing purchases on economic returns... What do other people think?
i think google is paying so much based on what doubleclick will be worth to them, rather then it's actual real market value. google obviously has some big plans for doubleclick, and if google overpaid it just means that doubleclick took place in some very smart bargaining. i've personally paid a very high price for certain websites based on being able to incorporate them into my network and utilize the resources i already have in a way that would maximize profit and make the acquisition far worth it to me. this is what i believe google is doing.
Burta I have to agree with you, I have a feeling that web 2.0 is going to bring with it bubble 2.0 but only time will tell.....
only time will tell, but how on earth can you defend spending 3.1 billion on a site that generates less than $152 million. what those ratios Google should be worth $310 billion (as $15 billion revenue). so buy more Google stock ;-)
I get the feeling that there is a web 2.0 bubble. the YouTube purchase fits into that but the DoubleClick deal does not (well, not directly). I see everyone rushing to develop these great and dandy 2.0 properties with piles of Venture Capital cash to burn but nobody seems to understand how short lived the vast majority of these currently popular sites is going to be. Each new 2.0 widget and gadget makes the old one obsolete. And no one site/company/development team can constantly churn out the best widgets. Eventually someone will have a better widget and the masses will flock to the new one. Many 2.0 sites will be bankrupt dinosaurs in 2 years. Maybe.
I don't doubt they do have some very big plans but I find it hard to believe that these "big plans" will be justified but a 3.1 billion dollar investment into a company that wasn't necessarily the owner of anything unique or not about to be duplicated by Google inhouse. Just because you have money doesn't mean you should be wasting it. Plus it isn't Google's money to burn - they have an obligation to share holders to get the best return possible on that money, and whilst I'm sure that the DoubleClick purchase wasn't a "waste" of money, I'd be interested to see where they plan to get their ROI from. It can only be justified if they believe they can use the technology they have adopted and the relationships to scale the DoubleClick operations. I would think that anything less than MASSIVE growth of the DoubleClick project now under the control of Google will result in it being a poor investment. Plus with the way new advertising mediums are moving who knows where we will be at in 3 - 5 years, and I get the impression that Google is banking on the fact that things won't dramatically change in that period of time. I totally agree - this recent flurry of Web 2.0 ventures is crazy I mean we are even seeing some recycled ideas that were prominent just prior to the 2001 crash *cough*agloco*cough*!
Agreed, I think this every time I hear about one of these websites being bought for 50x their actual earnings.
I actually disagree. Doubleclick can actually add to the bottom line of G with revenue. YouTube's revenue is still weak, and the cost of running it will only go up with more legal trouble on the horizon. The doubleclick aquisition also helps Google's advert market share by keeping adspace out of the hands of Microsoft. I'm sure that had a little to do with the desire to purchase it.
Google buying doubleclick has also factor in it that - google didn't wanted it to be bought by Microsfot or Yahoo
I don't think 150M a year does all that much for Google's bottom line considering AdSense alone is generating 5+ Billion a year in revenues for Google.
Some acquisitions are defensive. Google's afraid Yahoo, MS or eBay will buy doublelick so they buy them first.
Don't be. All these purchases have to do with Google's earnings and taxes. But why pay taxes if you can buy some really expensive stuff and write that money off not having to pay any taxes this year? Plus you can spread the inflated payment for the hugely overpriced purchase among your friends and family Again, taxable only next year. Next year will be more expensive purchases.
I dont think Google is going to run into any money issues. Times are much differnet than when the bubble burst. Theres less room for experimentation now. Before it was a race to develope as many business models and experiment as much as humanely possible. Now we at least have some kind of lines to draw and we know how far the market can stretch to a degree.
Using that logic, you could argue that GE's constant acquisitions are a sign of a business bubble. Big companies buy other big companies, frequently. Google's purchases just seem high profile because we are all so close to the business, in the real (non-tech) world only the youtube acquisition made any splashes.
Google want to get out from their ad text advertisinng. Other products (namely froogle, google base etc) is not successfull enough. They're making a wave on how to overcome this by acquiring established site. Yahoo has been making this for so long.