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Mar. 6, 2008

According to various reports, some European regulators plan to accept Google's proposed $3.1 billion takeover offer to acquire DoubleClick without any conditions. This would reject complaints by Microsoft that Google's acquisition would hurt industry competition.

Google's approval in Europe would be a blow to Microsoft, which tries to compete in the almost $41 billion online advertising market. Microsoft complained to U.S. and EU officials that it may be excluded of the combined company's ad network.

European Union antitrust officials, who have been investigating the deal since September, plan to rule that the proposed acquisition may proceed without changes, said the officials, who spoke on condition of anonymity because the decision isn't public yet. The ruling may come as early as next Tuesday.

Jonathan Todd, a commission spokesman, declined to comment, as did Microsoft spokesman Jesse Verstraete in Brussels. They said the EU must rule by April 2nd at the latest.

Last December, the U.S. Federal Trade Commission approved the acquisition without imposing asset sales or other similar conditions. The deal, announced last year, would be a windfall for Hellman & Friedman, the San Francisco-based private-equity firm that bought DoubleClick for $1.1 billion less than three years ago.

Greg Sterling, an analyst at Sterling Market Intelligence said "the acquisition will ultimately go through. However, Google doesn't even compete with DoubleClick. Acquiring it is simply for strategic reasons."

Microsoft trails Google in Internet search services. It said last April that Google's planned acquisition would give its rival more than 80 percent of the market for ads displayed on third-party Web sites.

The Redmond software giant plans to make its own acquisition in the market, with a $44.6 billion bid for Yahoo. That offer, announced on Feb. 1, hasn't been accepted by Yahoo's board as of yet. Microsoft bought DoubleClick rival AQuantive for $6 billion in 2007.

Overall, Google still dominates the Internet search segment with a 58.5 percent market share. Microsoft has less than 10 percent, while Yahoo has a little over 22 percent, according to January data from Reston, Virginia-based research firm ComScore.

Google spokesman Ben Novick said "this whole thing is still an ongoing investigation more or less, but we don't believe the acquisition raises any competition concerns. We sure hope the EC will come to the same conclusions as the FTC."

Google is dependent on sponsored links for most of its $16.6 billion in sales made last year. The company's stock has fallen about 40 percent from their high of $747.24 reached Nov. 7, 2007 on investor concern that fewer users are clicking on its Internet ads.

Additionally, the EU's acceptance of the deal would also be a defeat for privacy groups in the U.S. and Europe that lobbied strongly against the deal. European consumer group BEUC said the transaction would give Google significant control over online advertising.

For its part, Microsoft's bid for Yahoo would create the leading display ad company. That would save Microsoft from spending a decade and probably tens of billions of dollars in order to catch up with Google with internal R&D, said Peter Misek, an analyst with Canaccord Capital.

Some industry observers say that the deal's effect on users' private data could potentially be unprecedented and in clear violation of users' privacy rights.

Another Microsoft concern that was initially talked about last year when Google's proposed acquisiton of DoubleClick was made bublic was that Web sites would start dealing with a single company for all their advertising, rather than shopping around for different services, Sterling said.

DoubleClick's advertising services help Internet marketers measure how really effective their ads are and allow them to track and manage online advertising. The ads are typically so-called display ads, which include graphics or animation.

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Source: M.R.K. Inc.