Perception and reality sometimes have a twisted relationship. That’s particularly true in cases where being perceived as the leader makes you the leader. We tend to see these types of self-fulfilling prophecies in aggregator / market maker and other critical mass businesses. Markets that have these characteristics tend to exhibit spending and bidding wars to reach/maintain dominance.
Using Occam’s Razor as a guide, this naïve explanation may just be why it made sense for Google to outbid Microsoft for DoubleClick. I discount the economics that DoubleClick can bring to Google for two reasons: (a) some of DoubleClick’s current customers/partners will look for alternatives and (b) Google is still learning how to handle large acquisitions. Also, from an economic standpoint, Google would not have been threatened in the short or medium run by DoubleClick going to Yahoo! or Microsoft. However, the opportunity cost of losing DoubleClick from a perception standpoint was huge. It would have exposed a crack in the armor.
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Hats off to old Okham (Occam was a language we used to program transputers 🙂 ) but real life is often a little more complex. For just one dimension of this complexity:
I would say that buying Performics as part of DoubleClick is in itself a business case, in the light of Google’s drive towards CPA (or PPA, as they call it). They were already seen as a threat to the affiliate networks, now with a large such network ‘in their pocket’ they get good ROI from the DoubleClick deal. Not to mention the ‘split loyalty’ of Performics between Google and Yahoo (until now, that is)…
IMHO the deal has a multi-variable business case and the ‘shaven’ press releases they make are an attempt to hold their cards close to their chest – for a while.
Cheerz,
V.
Hey, Vlad, I’ve also programmed in Occam. Spelling-wise, both Occam and Ockham are correct.
the problem is that DoubleClick is no longer a true marketplace . . . with network effects . . . but an ASP . . .
Good points Simeon. It’s no longer enough to look at fundamentals or even company potential. In the Google v MS battle one must also consider how these aquisitions diminish or delay the ability of the competition to catch up.