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  1. 1. May 30, 2007 In the last few weeks there has been a series of significant mergers and acquisitions in the "new media" online advertising sphere that signal some of the profound changes shaping the future of the online medium: Google/DoubleClick (13 April 2007, $3.1 b); Microsoft/aQuantive (18 May 2007, $6 b); Yahoo/Right Media (30 April 2007, $680 m), WPP/24/7 (17 May, 2007, $649 m); TimeWarner/AOL/Third Screen (15 May 2007, undisclosed terms); AOL/ADTECH AG (16 May, 2007, undisclosed terms); Microsoft and EU-based Screen Tonic (3 May 2007, undisclosed terms).i We believe these deals (nearly $11 b in total) illustrate how the online advertising market is converging. Formerly discrete ad platforms and techniques, especially search and so- called display advertising (using video and other "rich media" graphical displays) are being integrated. Interactive advertising will work seamlessly on many levels (text, interactive video, etc.) across multiple platforms (mobile, social networks, broadband video, games, IPTV). The Google/DoubleClick deal combines the leading search marketing service with the number one provider (in the U.S.) of third-party online display ads. (The name Google choose to incorporate the new company—"Whooper Acquisition Corp."—is itself revealing). Another major deals illustrating the value of controlling consumer data in the digital era is the $3b private equity takeover of Acxiom.ii Spurring the deals is the recognition by Microsoft, Google and others that the online advertising market will grow dramatically. As Microsoft's president of platforms and services recently said, "[T]he [aQuantive] deal was not about the $40 billion in interactive advertising Microsoft projects marketers will spend this year." Online Media Daily explained that Johnson meant the buy-out was "a bet on the future of the total $600 billion advertising market as spending continues to shift to interactive channels." Microsoft, said Johnson, now has "a soup-to-nuts offering."iii These transactions also illustrate the increased ability of online advertising technologies to collect, analyze, and deploy for targeting purposes an ever-increasing array of sophisticated data-collection applications. Online advertising and the Internet writ large are being shaped to better serve forms of behavioral targeting (BT). Individual users and more discrete groups now have their data collected for profiling and targeting purposes, both on specific sites and, more recently, across dozens and even hundreds of affiliated websites. Called "retargeting," this new form of BT literally follows users across the Internet in order to engage them in specific transactions or a desired response to a brand. BT and its threat to privacy was the subject of a Federal Trade Commission complaint filed by CDD and the US PIRG in November 2006.iv It is possible that as a consequence, a dwindling handful of companies will have the capability to dominate the advertising system online. Google and Microsoft, for example, could become the two leading ad engines for North America and much of Europe (especially if a rumored deal between Microsoft and Yahoo! is developed). According to Technofile Europe, commenting on the recent Google and Microsoft 1
  2. 2. acquisitions, "[T]his deal basically completes the elimination of independent ad-serving technologies with any market share. Ad serving on the Internet is now controlled by Microsoft (via its acquisition of aQuantive and its Atlas service); Google (via DoubleClick's Dart system) and AOL (via its recent acqusition of Ad-Tech)." Google will also now control Falk Esoutions AG, an online advertising delivery and ad management firm that DoubleClick acquired in March 2006. At the time of the deal, DoubleClick acknowledged Falk's "widespread local market presence in Europe."v Microsoft's takeover of aQuantive allows it to enter this market, given that company's December 2006 takeover Accipter for just $30m. Microsoft also gains control of Germany-based Neue Digitale, which was acquired by aQuantive in August The same European analyst predicts more "transatlantic acquisitions in the coming months" as "U.S. players" reshape what he calls the "fragmented" European advertising network market.vii Further reduction in the online ad market is likely, according to Microsoft. As Joe Doran, general manager of Microsoft's digital advertising solutions unit, recently told Online Media Daily, "As we look at how the market is evolving, we think there will only be two large-scale advertising platforms … and we will be one of them" [the other being Google/ DoubleClick].viii The Google/DoubleClick and Microsoft/aQuantive mergers in particular raise both market competition and privacy concerns over their growing control of consumer data. As noted by Search Insider, "If Microsoft gains access to all the data, across all the engines, for aQuantive's entire client roster of search clients, it will be sitting on a treasure trove of information that it's never seen before—and which should have Google feeling very nervous. The same is true, of course, for the information that DoubleClick's Performics can provide to Google. To a network, an agency is a wealth of competitive data—a fact about which all of the networks are undoubtedly aware."ix Direct Marketing News also explained that "This deal gives Google access to publishers outside of its current AdSense network and to behavioral data that will help them with ad targeting."x Google/DoubleClick: A key antitrust concern is what one U.S. analyst has described as Google's "competition foreclosure" through its purchase of DoubleClick. As Precuror's Scott Cleland explained: Just as Microsoft vertically-leveraged (bundled/tied) its operating system dominance to dominate the office applications market via the Windows platform, Google apparently looks to vertically-leverage (bundle/tie) its keyword search dominance with DoubleClick's leadership in online banner/video display advertising, and with its Google-YouTubedominance in video search…. This vertical combination reportedly could give Google-DoubleClick upwards of 80% of the overall market for advertisements provided to third-party websites. Just like Microsoft became the default office applications platform for email, e-calendars, word processing, spreadsheets, and PowerPoint, for any user, Google has obvious designs on becoming the default Internet advertising broker/platform for: keywords, website display ads, and TV, radio, newspaper/magazine advertisingfor 2
  3. 3. the average large advertiser…. If Google can gain the first-mover advantages of offering advertisers the super-efficiencies of cross-media-platform advertising optimization, i.e. a vertically-integrated/tied advertising platform, individual advertising mediums and companies will largely be at their (anti-)competitive mercy going forward. Game. Set. Match….The DoubleClick acquisition, like Google's acquisition of YouTube, is really all about achieving competitive foreclosure long term. Google's "partnership' strategy is also all about competitive foreclosure…."xi As one leading online ad technology executive explained, DoubleClick serves more display ads for more advertisers and more agencies and more publishers than any other company in the world. With this deal, Google now controls more display advertising than any other company, which nicely complements their other businesses where they control more search and contextual advertising than any other company in the world…. DoubleClick currently processes more online ad campaigns and more ad transactions than any other company in the world, by far, particularly at the high end of the market. This data is a treasure trove. If Google wanted to, it could know exactly how much money its AdSense distribution partners make from other ad distributors, be they Yahoo! or or MSN. This is very powerful data. Even if they don't ever access the data itself, the metadata (the data about the data) is incredibly valuable. It is as if the world's biggest stock broker just bought the world largest stock exchange. Plus, DoubleClick probably sets more cookies on more consumer browsers than any other company in the world as well. Just the analysis of this data could yield for Google the keys to dramatically improving the targeting of all of their ads."xii We don't believe one can separate the data collection and privacy-related issues from the market structure. As one US leading analyst noted on Tuesday about the FTC's review of Google/DoubleClick, "The privacy issue is also the competitive issue," said Blair Levin, an analyst at brokerage Stifel, Nicolaus. "The biggest barrier to entry is not money or engineers or the networks, but the information on the behavior of people on the Internet," Levin said."xiii DoubleClick brings to Google very significant resources in terms of acquisition of data across applications and platforms. It will help deepen Google's dominance in the search market and permit it to better shape the broadband video markets. Google already dominates the U.S. online search market, with a 75.6% share (followed by Yahoo! at 16.3%). "Paid search is currently the key driver of US online advertising," notes market research firm eMarketer.xiv Google's clout in search will also be extended via DoubleClick's "Performics" division, which specializes in both "Search Engine Marketing and Affiliate Marketing Services."xv Performics "FeedLab SM" product will also provide additional data collection and use applications for Google.xvi Ironically, DoubleClick already noted Google's dominance in the European Search market. In its Decmber 2006 report, "The European Search Advertising Landscape, 2006," DoubleClick noted that "Google dominates the search market in Europe, and this 3
  4. 4. is especially true so outside the U.K. In Germany, Google's market share approaches 90%." "The game in Europe is Google," declared Andy Atkins, CEO of WebCertain. "… Google sites are also visited by a greater proportion of visitors in Europe (75%) than in the US (60%)…. [I]n July 2006, Google sites were the most visited online destinations in Europe with over 150 million unique visitors in that month. The dominant search engines in Europe are also the largest media owners—Google, Yahoo and MSN…. The European online ad market is concentrated in the hands of a few major players."xvii DoubleClick's DART system provides Google with a complete set of applications—and data access—to allow it to extend its more linear search advertising business into the third-party and rich-media advertising market. DART Search is a "comprehensive search management solution, encompassing campaign management, ad management, keyword management, bid management, reporting and conversion tracking" system."xviii Such information could give Google an advantage in determining the bidding price for keywords and other interactive advertisements.xix DoubleClick's role in serving up cookies to track and then deliver advertising has given them a digital treasure trove of data. "Without a doubt, DoubleClick's historical data is very valuable," says Jupiter Research analyst Emily Riley. "Every time you're online, every page visit, and every ad you see comes with the possibility that a cookie is placed on your machine. DoubleClick has all the data." How much data? Ms. Riley's back-of- the-envelope calculation puts it into the fifteen figures: with more than 100 million web users viewing a quarter million pages a year, it hits the 2.6 quadrillion mark—and that's just U.S. users. If DoubleClick's ad network touched even half of those interactions, it amounts to the kind of database advertisers would drool over. "What it does is complete the picture for Google about what's happening on publishers' web sites," Ms. Riley says.xx Rich Tehrani, editor of TNC, noted that "with the acquisition of DoubleClick, Google now has access to the cookies and subsequently browsing history of vast numbers of web users. It would be fair to say that greater than 85% of Internet users frequently come into contact with ads served by DoubleClick. In addition there are a vast number of sites serving up Google's ads and running Google Analytics. Google perhaps now has access to the behavioral information of over 90% of web users. One can expect Google to start mining DoubleClick's databases immediately and in the process, cross reference this data with its own vast databases of search history and perhaps even Gmail content."xxi DoubleClick also provides extensive behavioral targeting tools to Google. DoubleClick tracks user behavior through cookies and what it calls its "Spotlight" tags and Boomerang products. Spotlight tags are "transparent GIF files embedded in the website, to help manage and track the effectiveness of online advertising…. The spotlight tags enable DoubleClick to recognize a unique cookie on your web browser, which in turn enables us [a publisher] to learn through DoubleClick which advertisements bring users to the Website. The cookie was placed by us, or by another advertiser who works with DoubleClick."xxii DoubleClick has expanded its use of the tags to the rich media and interactive video environment. Motif Spotlight enables customers to turn "data into meaningful information…."xxiii 4
  5. 5. Boomerang, says DoubleClick, is a one-to-one targeting solution, enables you to identify and re-target customized segments of prospects and customers across your entire media buy, based on the actions they've taken on your site. The net result is a dramatic improvement in customer acquisition, conversion and retention for your organization…. Behavioral targeting is the most effective form of targeting available. It allows you to re-target the most desirable audience of all: browsers who have already shown an interest in your product or service. With Boomerang, you can now engage that audience in a dialogue, providing timely and relevant messages triggered by their online actions. Boomerang delivers true behavior-driven advertising, so you can reach pre-qualified prospects and customers more quickly and easily." Among the features promoted by DoubleClick is the ability to: Re-target customers who have already browsed their site to bring them back. Re-target site visitors who have "dropped off" the purchase cycle with a related message to drive them back to the site. Up-sell and cross-sell customers that have already purchased core products. Reengage customers who have not visited or purchased recently. Show specific advertising messages based on expressed interests, such as delivering an ad for a new car model to a browser that downloaded a brochure on last year's model. Test different offers and price points to determine the most effective methods for converting browsers into buyers.xxiv DoubleClick has been working with the European-based AdLink Group, which introduced a behavioral targeting product for "pan-European campaigns" in February 2007. (DoubleClick was a financial partner, but sold its investment in 2004). AdLink describes itself as the "the leading network for digital marketing solutions in Europe," with 82 million unique users. In its press release, AdLink explained that "[W]ithin the framework of the behavioural targeting strategy, AdLINK has developed a new product line which offers marketing opportunities via re-targeting and behavioural targeting. With this tool, online campaigns are possible which are not based on general socio- demographic findings but on the actual behaviour of the respective internet users [emphasis added]. In March 2007, DoubleClick announced the launch of its DART Adopt product in Europe.xxv DoubleClick acquired UK-based "Smartpath" in 2004, a "marketing resource management business" with expertise in "data/analytics" among other services.xxvi DoubleClick's DARTmail also provides for data collection capabilities and is used in both the U.S. and European markets.xxvii DARTmail is integrated with powerful databases, including those from Omniture. Its Ensemble product provides "Enhanced Customer Intelligence, Real-Time Marketing and Email Integration.xxviii Google, of course, also has financial relationships making it the search engine by default 5
  6. 6. on AOL (via a $1b investment resulting in a 5 percent holding); on MySpace (via a $900m fee to News Corp/Fox); with Firefox (via annual fees to Mozilla Foundation), and Dell Computer.xxix (DoubleClick is also a partner with AOL).xxx DoubleClick also appears to have access to user data via its relationship with the Abacus Catalog Alliance, which it sold in December 2006. But as of April 2007, on the DoubleClick UK website, it notes that "The Abacus Alliance database contains transactional data with detailed information on consumer and business-to-business purchasing and spending behavior. Over the past ten years, transactional data has proven to be the most effective predictor of future buying behavior. By combining transactional data with advanced statistical modeling, direct marketing can help marketers target the potential consumers that are most likely to buy their products or services."xxxi The acquisition raises questions about the future competitiveness of the online market. As Online Media Daily noted, With DoubleClick, Google not only bought an ad exchange opportunity, but the installed base of the two-pronged DART franchise—with its Publisher and Advertiser flavors. This move stretches the definition of the publisher role farther than ever before. Combining DART, an ad exchange, and Google's heritage of advertiser direct creates a potentially frightening situation for agencies. Add to that Google's entry to offline media, including TV, radio and print, and a rather sinister master plan begins to unfold. The move is part of a trend toward giving the seller more power throughout the value chain. With 2006 revenues of $7.14 billion, Google already claims a quarter of the online ad revenue worldwide. Moving from search to display and the offline ad channels, it appears that Google is assembling the ultimate media one-stop-shop for advertisers—a Wal-Mart of Media, so to speak. This gets even more intriguing when you consider why ad servers were developed initially: To manage and audit multiple advertisers…. Now the auditor becomes the audited supplier.xxxii As Google explained, via a FAQ, in announcing the merger, its intention is to give it greater access and ability with user data: Q. How will this acquisition benefit DoubleClick advertisers? A. The acquisition will give advertisers more targeting and buying options and will provide maximum reach for their target audience, helping them achieve the best returns for their campaigns. Online advertising gives advertisers the ability to precisely target the right ad to the right user at the right time. Working with DoubleClick, we will make online text and display advertising more targeted and relevant for the user and therefore more valuable to the advertiser.xxxiii One of DoubleClick's key technologies is its Motif product, used to track user interaction with video and so-called rich-media ads. As the search and online video markets combine, the ability to identify user behavior with interactive media environments will be central to online advertising. Google's interest in DoubleClick in this regard was no 6
  7. 7. doubt fueled by its 2006 acquisition of YouTube. Google is now in the process of data "tagging" all the videos on YouTube in order to make the video service more effective for advertisers.xxxiv Gaining control of Motif will enable Google to more effectively expand its role in the rich media ad market sector. As DoubleClick itself noted in its research report, "Rich Media Landscape in Europe, 2006" the 2006 World Cup was a key point for "broadband video in Europe," with 73 million pages served to viewers via mobile cell phones and 125 million video streams via official World Cup website.xxxv As Google expands its in- stream and related video advertising, it will have the capabilities of DoubleClick's Motif: Motif enables DoubleClick and its clients to access: audience interaction metrics: Motif's exclusive Audience Interaction Metrics Package lets you gather data on more than 100 unique interactions in every creative unit including multiple exit links, counters, timers and video metrics. You'll automatically get metrics on how long each ad was displayed or how the viewer interacted with the ad. Plus, you can customize additional events to track based on your creative concept…. • Ad Interaction Time: Tracks the average amount of time a user interacts with your ad, so you know what works best. • Interactive Impressions: Shows how many Motif ad impressions generated user interaction for better understanding of audience response. • Ad Display Time: Tracks the average amount of time each Motif ad is displayed to help measure brand exposure and optimize site placements. • Exit Links: Let you track multiple click-throughs within a single rich media ad. Essential for when you're promoting more than one offer in an ad. Motif makes tracking multiple exit links easy and eliminates click commands. • Event Counters: See exactly what your audience is interacting with by tracking customizable events like rollovers, mouse-overs and drags. • Timer Events: See how much time a user spent viewing or interacting with specific elements in your ad, like an interactive game or video. • Motif Streaming Video Metrics: Motif provides the same in-depth reports for your video ads as it does for other rich media features. You can track audience video plays, completions, pauses, stops, restarts, mutes, average view time, and custom video interaction metrics.xxxvi YouTube executives have told the advertising industry that "By Q3 [2007] we'll have a tremendous amount of metrics and data around every video. There's lots you can glean from looking at who's looking at what. It's a real-time focus group that happens all day, every day."xxxvii Google's new "universal" search, Web history feature, personal search and Google translator service (for cross-language search and related online marketing) will further strengthen its position to both collect user data and have clout in the U.S. and EU markets.xxxviii 7
  8. 8. Search market expert Danny Sullivan, in discussing Google's Web History, recently noted that "Google's Search History feature, which was switched on as a default option for many Google searchers in February, has now been renamed Web History to reflect how it has expanded to track what Google users do as they surf the web. It's a huge move for Google and raises anew privacy issues.xxxix Another online market observed explained that "It is hard to beat them [Google] on relevancy because they have more data than any other company in the world (toolbars, browsing history associated with user accounts, Gmail, AdWords, AdSense, Google analytics, free website optimizer, Google Checkout, cost per action ads, the most popular feed reader, etc etc etc). Even if you did find a way to match Google's relevancy, nobody would notice unless you could match their brand, and overcome the self fulfilling prophecy bias/skew Google's personalization features give searchers."xl DoubleClick's own research shows that "Search plays a role in roughly half of all online purchases." The combination of Google and DoubleClick will enable the company to continue its dominance in search and expand to incorporate the new mobile and broadband video platforms as well.xli Beyond the ability to set prices for online advertising, the impact of consolidation, we believe, could have a negative impact on the diversity of content online (broadly meaning content available via PC, mobile, interactive TV). How content creation and distribution is "monetized" (to use a favorite word of digital venture capitalists) will largely be determined by whether it brings significant returns on revenue, raising critical competition issues for a medium said to possess a "long tail" in its ability to support diverse content. We believe that the impact on civil society content must also be a factor in articulating concerns about Google/DoubleClick and the related mergers in online marketing. Recommendations: • NGOs should press their regulatory bodies and other officials to engage in a serious examination of the deals and what they mean for the future of the Internet and online media. Appropriate safeguards should be sought. • NGOs should use these deals to help educate the public about what such mergers mean for the future of democratic content in a civil society and also for privacy. • NGOs should work together on a collaborative strategy to address these mergers and related issues. 8
  9. 9. i value/; ndmViewId=news_view&newsId=20070516005531&newsLang=en; fuseaction=Articles.showArticle&art_aid=60652;; ii iii iv For more information on BT, see v vi;; http://www.avenuea- vii viii ix x xi xii xiii xiv xv xvi xvii Available as PDF via xviii "DART Search: Search Engine Data and the 99% Policy," Product Overview, 2007, available as a pdf via df; See also xix See also "DART Search: Search Engine Marketing at Your Fingetips," DoubleClick, 2006, search_UK.pdf+DART+Spotlight+tags&hl=en&ct=clnk&cd=10&gl=us&client=firefox-a xx xxi xxii space=CommunityPage&control=SetCommunity&CommunityID=205&PageID=223 xxiii For more information and a discussion of how it targets via Motif, see xxiv "Boomerang for Advertisers, Marketers, and Agencies," DoubleClick, 2006, Boomerang+for+Advertisers,+Marketers,+and+Agencies.%E2%80%9D&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a;, +AdLink&hl=en&ct=clnk&cd=1&gl=us&client=firefox-a; blog/362839/doubleclick-launches-dart-adapt-for-publishers.html?keywords=adlink xxv xxvi xxvii; xxviii; xxix,+Time+Warner+strike+1+billion+deal+on+AOL/2100-1025_3-6003187.html;;;
  10. 10. xxx c=0506_smr&id_lead=newsletter&id_source=newsletter_0506 xxxi xxxii xxxiii xxxiv xxxv Available as pdf via xxxvi;; xxxvii [subscription required; CDD will send upon request]. xxxviii; fuseaction=Articles.showArticleHomePage&art_aid=60960; xxxix xl xli