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EU clearance of Google-DoubleClick is a bigger deal for Google than market appreciates

EU clearance of the Google-DoubleClick merger is a much bigger deal for Google than the economy-obsessed marketplace appreciates.

  • Google deserves credit for seeing the incredible value and competitive advantage of acquiring DoubleClick and also for realizing that they could exploit the soft underbelly of antitrust law that is weak at anticipating anti-competitive problems before they "see the whites of the eyes".
  • As I explained in my detailed competitive analysis of this merger at this is a brilliant merger that gives Google a huge competitive advantage and powerful network effects going forward.
    • Microsoft understands this -- that's why Steve Balmer said that their hope in acquiring Yahoo is that they would then be able to not lose money anymore in online advertising.
      • Without Yahoo, Microsoft understands it will continue to lose competitive ground quickly to Google.
    • While the marketplace and the media are focused on the Microsoft-Yahoo potential combination, that potential combination is several months away at best from being an actual force in the marketplace if it occurs at all.
      • Meanwhile back at the ranch... Google started with a huge competitive lead in online advrtising and DoubleClick hugely extends that competitive lead substantially further.

The market is only seeing the "forest" here and missing the uniqueness of the newly combined Google-DoubleClick "tree." The market is obsessed with the overall effect of the economy on companies and is blind to seeing the upside from non-macro economy developments, like the closing of this exceptionally powerful merger -- and the overall powerful market shift of advertising from offline to online that is unlikely to be affected much by the overall economic slowdown.  

  • The acquisition of DoubleClick gives Google immediate sales access to all of the top 1500 world advertisers that Google does not have. This cross-selling effect will accelerate Google's increase in market share beyond what it is already achieving without DoubleClick.
  • Online advertising is also all about data on consumer behavior. DoubleClick has the single biggest personal database of consumer click behavior in the world outside of Google. That data will further improve the effectiveness of Google's awe-inspiring monetization engine.

Investors also appear to be forgetting that Google set a really low bar to beat in second quarter earnings. Last quarter, Google grew revenues 51% but earnings only grew a shockingly bad 17%! If Google can't beat 17% earnings growth in second quarter to begin to resestablish earnings momentum, they truly have completely out-of-control, empire-building, corporate spending.

  • Because investors strongly suspect Google is not being run for the benefit of investors, but for the ego gratification and imperial ambitions of its founders, investors may stay away even if Google reestablishes earnings momentum, because they have little confidence that it will be sustained.
  • In short, consider me bullish on Google's revenue growth, but bearish on Google management ability or willingness to control spending.