Lemon Foundation

We have seen a flurry of activity in the online advertising market recently, with four major online ad firms being acquired by Google, Microsoft, Yahoo and WPP.

The big  four firms have collectively spent $10.4bn to acquire the largest online display ad platform companies DoubleClick, aQuantive, Right Media and 24/7 Real Media, betting that display ads will be a key driver of growth for online ad spending.
This wave of consolidation started with the acquisition of DoubleClick by Google for a massive $3.1bn, twice the amount the company paid for YouTube last year.
 
This move gives Google a stronghold on the online advertising market, with some estimating that Google will now control 83% of the contextual ad market, and 50% of the total online ad market.

The deal has given Google something it didn’t have before: a successful advertising business for banners, videos, and other display ads which are often intended more to promote brands than to generate immediate sales.

The search advertising market was worth around $6.8bn in the US last year, and made up 40% of the overall online ad market. Display advertising was worth $5.4bn, or 32% of the online ad market.

In the UK, display advertising accounted for 22.5% of the market, with £453.7m spent, compared with £1.16m spent on search in 2006, a 57.8% share of the market.

However, the display ad market is predicted to grow because of the increased targeting capability which Google and others will bring to the market. Display ads are often placed on web pages with content similar to the ad, so a car manufacturer would place an ad on an auto site.
Now though, ad networks and search engines can target such ads at customers who have demonstrated an interest in the product, even if the content is not directly related. 

All of the ad firms which have been snapped up recently possess contextual and behavioural-targeting technologies.
The other big deals seem to be a response to the Google/DoubleClick deal – WPP’s acquisition of 24/7 Real Media gives the company added technology and search marketing skills, as well as a presence in Asia.

Meanwhile, Yahoo’s purchase of Right Media, gives it a display ad exchange called Remix Media, to go with its existing display ad network.  
Microsoft was said to be in the running for DoubleClick, but ended up spending a massive $6bn on aQuantive, which gives the software firm ownership of ad technology provider Atlas; interactive agency AvenueA/Razorfish; and Drive PM, which provides targeting tools for internet advertisers and publishers.
Of those firms, Atlas is most significant, as it competes against DoubleClick's technology platform, allowing advertisers to place ads more efficiently and publishers to better manage their inventory.