Google has been on a spate of acquisitions over the past six months or so, something CEO Eric Schmidt has talked openly about, saying the search engine expected to buy an average of one new company every month for at least a year. Most (although not all) of those acquisitions have been small startups, many started by ex-Googlers. But one of the search giant’s latest purchases could cause more than its fair share of problems for the company, depending on how Google proceeds. That acquisition is Invite Media, which Google announced it was buying this week. A price hasn’t been announced, but Peter Kafka of All Things Digital said sources told him it was in the $70 million range.
Not a big acquisition, but a potentially thorny one. Why? Because Invite runs a banner advertising exchange platform designed to allow buyers to plan, run and monitor ad campaigns that run on multiple ad networks, such as Yahoo’s Right Media, Microsoft’s AdECN, and an open network called OpenX. And Google just happens to have its own banner advertising network, the DoubleClick Ad Exchange, an offshoot of the company’s DoubleClick for Advertisers platform. DoubleClick, which Google bought in 2008, is also one of the largest banner advertising companies on the Internet.
As Liz Gannes pointed out in her GigaOM post on the Invite deal, this all adds up to a pretty glaring potential conflict of interest. Ironically, the CEO of Invite Media wrote an opinion piece several months ago arguing that “demand-side platforms,” such as Invite, “should not, under any circumstances, own or operate an ad network.” The risk for Google is that by owning both Invite and a large ad network, it could alienate the very customers it is trying to appeal to — since they might not believe the assurances that it’s playing fair in showing them ad network options. And that’s not the only downside.
Google also risks adding fuel to the concerns over its dominance in the online advertising market. Critics who opposed its $750-million purchase of mobile advertising provider AdMob — which was reviewed by federal authorities for six months before finally being approved — argued that Google already controls the majority of the world’s keyword-related search advertising, as well as banner advertising through the ownership of DoubleClick, and that giving it a dominant position in the emerging world of mobile would compound this problem. Regulators apparently disagreed, however, in part because Apple launched its own mobile ad platform called iAds, which they saw as providing competition for Google. Undeterred, some critics have already raised concerns over the Invite deal.
It’s true that the purchase of Invite isn’t going to change the balance of power in the online ad world, at least not like the AdMob acquisition or the $3.1-billion purchase of DoubleClick itself. However, the perception that Google is removing an independent player in the growing ad-exchange segment of the market — even if the company denies that this is the case — isn’t going to help the company in its attempts to move the spotlight away from its dominance in the industry. And it will now have to be twice as careful when it makes decisions that affect the banner market, to avoid renewed criticism from both competitors and regulators.
So what can Google do to prove the Invite acquisition is not a bad idea for the industry? One step would be to keep the company as separate as possible from the rest of DoubleClick’s business — both physically and operationally. The company could also try to emphasize the openness of Invite’s platform, in as many ways as it can, whether by asking customers for endorsements or by inviting external industry players to vet or approve its independence. Either way, it’s going to take a lot of extra effort. Hopefully the acquisition proves worth it.