Battelle gets it Wrong

by StockJockey

Sunday, April 15, 2007 - 2:32 pm

I found Friday’s announcement that Google will buy DoubleClick interesting on several fronts...the first being that Google is using cash, not stock, to fund the transaction. Apparently Mountain View is using cash as it does not want to issue an undervalued currency-its own stock.

Late Friday, the search giant—which will report first-quarter earnings on Thursday—announced that it had acquired online advertising tech firm DoubleClick for $3.1 billion. Consistent with prior statements that it considers its own stock undervalued, Google paid the deal in cash to the consortium of private equity firms that held DoubleClick.

The DoubleClick rumors have been circulating for weeks, giving Eric Schmidt plenty of time to get his story straight going into friday’s conference call. Still, he chose to dance around the logic behind the deal. Was the purchase price irrelevant? Was keeping the property out of Microsoft’s hands the driver of the deal?
Still, Schmidt struggled to explain why now was the right time for Google to snap up DoubleClick. In response to a question about why the deal was happening now, Schmidt said “When we did a strategic review, which we’ve done for this year, we realized that the scale of the display ads business was much larger than we had thought.” Google’s move was driven by “An understanding now of how much larger an opportunity it was and how it could be targeted,” he said. TheStreet.com

Although the deal seemed to be telegraphed to many, noted Google pundit John Battelle got it wrong. But he will get a meal out of the transaction. Although it won’t likely be that tasty.

Battelle will have to eat a recent post predicting the contrary. Hopefully for John’s sake pixels taste better than hats:

This purchase requires a lot of thought. Will Google make the service free? Did it buy the service mainly for the data about display advertising - data it wants so it can drive efficiencies into that market? The price is way over the whisper number last week - did Google once again outbid its competition? Looks that way. The price is cash - not stock. Now Google has a major set of relationships with display advertisers.

But will they trust Google? My sources told me that Google was building its own, now it’s clear it wanted the relationships which came via a market leader. And to force me to eat my post, which I will do Monday when I can get home to a printer (yum).

More to come.
John Battelle’s Seachblog

Apparently, John is unlike many people on Wall Street. He is willing to admit it when he is wrong.
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