Report names Microsoft among DoubleClick suitors

Private equity firms want $2B for the online ad sales company

Online advertising sales and hosting company DoubleClick Inc. is up for sale, and Microsoft Corp. could be a buyer, according to a Wall Street Journal report today.

Private equity investors Hellman and Friedman LLC in San Francisco and JMI Equity in San Diego bought DoubleClick for $1.1 billion in 2005, and they have since transformed the company, selling off some units to focus on the core business of advertising.

Now Hellman & Friedman has put a price tag of around $2 billion on its stake in the company and has retained investment bank Morgan Stanley to help it find a buyer, the Journal reported, citing people familiar with the matter.

Microsoft is among the companies already actively discussing a possible deal, the Journal said.

DoubleClick staff in London had not heard anything about the negotiations, company spokeswoman Doireann Gillan said this morning. Microsoft representatives in Europe refused to comment on "rumor and speculation."

As online advertising volumes increase, portal companies and other large Web properties must decide whether it is best to sell and serve ads using their own platforms, or whether to outsource these activities to another company, said Nate Elliott, an analyst at JupiterResearch, a division of JupiterKagan Inc.

Search portal companies such as Yahoo Inc. and Google Inc. have chosen to build systems to sell and serve advertising. Other sites turn to companies such as DoubleClick to handle the technical side for them.

Microsoft set up its own platform in 2005, initially selling online advertising on its properties in France. It went on to launch the service in the U.S. last May. The platform, called adCenter, serves up targeted, pay-per-click ads on Web properties such as Windows Live Search. Microsoft has pledged to invest $2.4 billion in research and development this year, with nearly half of that amount going to its Internet business unit, which handles Live Search and adCenter.

Microsoft bought DoubleClick, it would not be its first acquisition in the field. Last May, the company bought Massive Inc., a specialist in placing advertising within video games. It also bought DeepMatrix Corp., a Web analytics company, intending to incorporate DeepMatrix's activities into its adCenter platform.

Selling advertising "is clearly core to what Microsoft does online. For MSN and related properties, advertising is the key revenue stream, and DoubleClick would be a good fit," said JupiterResearch's Elliott. However, Microsoft has also put a great deal of effort into developing its own system, and therefore could also choose to go it alone, he said.

There's little possibility for further major consolidation in the ad serving market, because DoubleClick has already bought up its largest competitors, Elliott said. DoubleClick bought Germany's Falk eSolutions AG last March.

Copyright © 2007 IDG Communications, Inc.

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