Friday, May 18, 2007

Madison Avenue gets Convergence

Google has shown that online advertising is a big growth business. If you still do not believe it, look at Google's stock price--still largely based on growth premium.

Google Inc. (GOOG)

To further consolidate its position, Google has agreed to but DoubleClick for $3.1 billion. We know that Yahoo and Microsoft want pieces of that growth potential and are making some moves of their own (including speculated combination of their online activities). And there are many smaller rivals wanting in as well.
How should traditional advertising companies respond? After the initial period of wait-n-watch to see if this shift is real, they go on an acquisition spree to buy new competencies.
1. Publicis Group bough Digitas for $1.3 billion in December 2006.
2. WPP has agreed to acquire 24/7 Real Media for $649 million in cash this week. Sir Martin Sorrell said in so many words during his conference call with investors that "the deal was prompted by Google's acquisition of DoubleClick."
Did Madison Avenue need additional wake up calls to recognize the shift to the network era? In the 2005 Annual report, he devoted the better part of a page to speculate if Google was a friend or foe?

What other corporate combinations will we see as advertisers (and advertising agencies) recognize that the convergence is here.. and here to stay and evolve and morph in some interesting ways? I believe that we have just gotten started.

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