Microsoft Cannot Afford To Lose Bidding For DoubleClick

DoubleClick is the largest broker of display advertising on the internet. The company was once public but is now owned by private equity interests. DoubleClick’s main business is to serve the advertisements that appear on websites. Its brokerage of advertising is the glue between internet advertisers and online properties.

Unlike Google (GOOG), which sells text advertising, Doubleclick’s business is to sell display advertising which is often paid for on a "per thousand impressions" basis and not "per click" as the Google text ads are.

Microsoft (MSFT) is hoping to buy DoubleClick to move to the crossroads of the internet advertising business. It has lost much of its foothold there as use of its MSN portal has given way to Google’s search site. Owning DoubleClick would make it the king of the internet display advertising business while Google would have the place at the top of the online text advertising food chain. Microsoft cannot afford to have Google dominate both online display and text advertising. It would strengthen Google’s already powerful hand.

If Microsoft allows Google to buy DoubleClick, it will be a sign that it has given up on making online advertising an important part of the company. It will tell the internet community that the world’s largest software company is content to sell operating systems and Xboxs, but that online content and marketing are not part of its future plans.

The bidding for DoubleClick will be the litmus test of Microsoft’s resolve to challenge Google as an online force. For that, the reported purchase price of $2 billion is cheap.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.