DoubleClick announced the DoubleClick Advertising Exchange, an auction-based marketplace for advertisers and publishers to buy and sell online ad inventory. The DoubleClick exchange was launched in beta test with a select group of advertisers and publishers, including Advertising.com. The exchange is a natural development for DoubleClick as it leverages its access to both publishers and advertisers through its ad-serving technology. The exchange will also be completely integrated with the DART platform - an advantage for publishers who can manage yield across channels, and for advertisers who can use DFA features when buying from the exchange.
The concept of the ad exchange got Wall Street’s attention when Yahoo! invested $40M for 20% of Right Media in 3Q06. It is sometimes perceived as a threat to the viability of ad networks such as ValueClick’s (VCLK), 24/7 Real Media’s (TFSM) or aQuantive’s DrivePM (AQNT). The exchange is viewed by Jefferies Research as an additional way for publishers to monetize remnant inventory. In fact, these exchanges could improve overall monetization levels online and increase the total online advertising pie -- a strong positive for the industry. To be sure, the concept could someday pose a risk to the ad networks if embraced in full by publishers and advertisers. However, both publishers and advertisers may continue to favor the simplicity of working with an ad network. This is especially true with respect to networks that do not operate under the arbitrage model (such as VCLK or TFSM), and are thus less dependent on remnant inventory. At the same time, Advertising.com’s participation in DoubleClick’s beta proves that arbitrage players could also be interested in participating on such an exchange and working with it as a partner rather than a competitor.
The timing and launch of the exchange is clearly designed to fit in with Hellman and Friedman’s efforts to sell DoubleClick to the highest bidder, with Microsoft (MSFT) and Google both competing. Such a combination is not viewed by Jefferies Research as a threat to companies such as AQNT, VCLK, or TFSM. Indeed, the speculated multiples of a potential deal imply significant premiums to where the public “comps” trade. Versus the primary player in the ad exchange market, Right Media, DoubleClick should be able to compete effectively due to its large installed base of publishers, and to certain tweaks in the model that may improve upon the basic concept. For example, DoubleClick will allow advertisers to view other buyers’ bid for certain inventory, and learn about completed transaction bids. DoubleClick will also offer publishers the option to remain relatively anonymous on the agencies.
Strategically, DoubleClick’s acquisition by Google, Microsoft or AOL could act as a precursor to other moves by competitors. For example, the company with the losing bid for DoubleClick may go after Right Media, but given Yahoo’s 20% stake, the latter is likely to walk away with the prize. Others may become targets as well, particularly aQuantive, ValueClick and 24/7 Real Media. Bottom line, the sale of DoubleClick is likely to spur the large players into action, possibly driving up valuations for the group as a whole.
Thanks Jefferies & Company, Inc, April, 2007
The concept of the ad exchange got Wall Street’s attention when Yahoo! invested $40M for 20% of Right Media in 3Q06. It is sometimes perceived as a threat to the viability of ad networks such as ValueClick’s (VCLK), 24/7 Real Media’s (TFSM) or aQuantive’s DrivePM (AQNT). The exchange is viewed by Jefferies Research as an additional way for publishers to monetize remnant inventory. In fact, these exchanges could improve overall monetization levels online and increase the total online advertising pie -- a strong positive for the industry. To be sure, the concept could someday pose a risk to the ad networks if embraced in full by publishers and advertisers. However, both publishers and advertisers may continue to favor the simplicity of working with an ad network. This is especially true with respect to networks that do not operate under the arbitrage model (such as VCLK or TFSM), and are thus less dependent on remnant inventory. At the same time, Advertising.com’s participation in DoubleClick’s beta proves that arbitrage players could also be interested in participating on such an exchange and working with it as a partner rather than a competitor.
The timing and launch of the exchange is clearly designed to fit in with Hellman and Friedman’s efforts to sell DoubleClick to the highest bidder, with Microsoft (MSFT) and Google both competing. Such a combination is not viewed by Jefferies Research as a threat to companies such as AQNT, VCLK, or TFSM. Indeed, the speculated multiples of a potential deal imply significant premiums to where the public “comps” trade. Versus the primary player in the ad exchange market, Right Media, DoubleClick should be able to compete effectively due to its large installed base of publishers, and to certain tweaks in the model that may improve upon the basic concept. For example, DoubleClick will allow advertisers to view other buyers’ bid for certain inventory, and learn about completed transaction bids. DoubleClick will also offer publishers the option to remain relatively anonymous on the agencies.
Strategically, DoubleClick’s acquisition by Google, Microsoft or AOL could act as a precursor to other moves by competitors. For example, the company with the losing bid for DoubleClick may go after Right Media, but given Yahoo’s 20% stake, the latter is likely to walk away with the prize. Others may become targets as well, particularly aQuantive, ValueClick and 24/7 Real Media. Bottom line, the sale of DoubleClick is likely to spur the large players into action, possibly driving up valuations for the group as a whole.
Thanks Jefferies & Company, Inc, April, 2007
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