If there was a honeymoon period for the Google acquisition of Invite, it is well and truly over - a mere two weeks in total. In a post yesterday, on his ReactionWheel blog, Jerry Neumann, discussed some of the industry's concerns around the deal. He begins his post by informing us that Google wants to own the display market. That's a given. Google's a public company with ambitious growth targets. It has unbelievable resource, which no company in this space comes even close to. Display is a mess, and Google sees opportunity in chaos.
Neumann points out that Invite will probably get access to Google's treasure trove of search and GCN data. This will allow it to offer buy-side clients unparallel targeting capabilities. It will undoubtedly impede other players in the space, including XA.net - a DSP which Jerry has an investment in. It is no secret that Google was planning to build DSP and RTB capabilities into DFA - and it would be logical to assume they would have allowed DFA to leverage the same search and GCN data. After looking at the timescales of getting it to market, Google reasoned that it was cheaper to buy Invite at a snip for $70 million dollars. The price does severely mess-up the valuations of other DSPs, eyeing up a possible bonanza exit. I'd say some VCs weren't too impressed - but I digress.
Jerry is right to point out that Google is now ridiculously conflicted. It's an ad network, an exchange and now a DSP. He points out that having insight into data and pricing from other inventory sources would give it a real competitive advantage over its rivals:
Because when Invite is integrated into Google, it seems reasonable to assume that Google will:
1. Start cherry-picking the other exchanges' best publishers; and
2. Start front-running the other exchanges, keeping the demand for themselves****.By giving Invite access to their marketplaces, Microsoft, Yahoo! and AOL give Google access to data about position and price of every ad that runs through them. They would be giving Google the very data it needs to outcompete them. If the other exchanges allow this, they won't for long. Because if they do, they won't be in business for long.
**** It's widely rumored in the industry that Google has a double standard in exchange pricing between people buying through Google's user interfaces and people buying through the exchange API. If Invite is an insider, it shouldn't surprise anyone if they get preferred access.
He has a point here. But it won't be so easy for Google to dominate completely - especially when a lot of publishers on the sell-side are hesitant to throw their lot in with Google. Rubicon, Improve Digital, Admeld, Adjug, Adscale and the Orange Ad Market are becoming the preferred automated channels for a majority of European publishers. It will be difficult for Google to "front-run" other exchanges when its own exchange only has access to millions of Mickey Mouse Adsense sites with crap content. Audience matters - but so does context. Expect publishers to be more self-aware of this. And there is no doubt in my mind the good people at Rubicon, Admeld and Improve will be pushing hard on the agnostic angle. You'd expect, if you were a betting man, Google to make it very difficult to integrate DFP with these platforms. But these guys are good at innovation - and they've got the resource, talent and cash to meet the challenge.
Giving too much power away to Google is not in the interests of any publisher. There needs to be competition in the space to improve pricing and innovation. Is it really healthy for a single company to have a stranglehold over a publisher's entire income? I would call that commercial suicide. Monopolies are a bad thing. But I will say one thing for Google: it keeps everyone on their collective toes, making companies innovate and continuously push the envelope.
The Invite acqusiiton could leave some on the buy-side in real trouble - especially the big agencies. Disintermediation is a real possibility here. If I was a Google strategist, I'd be looking beyond the "unnecessary buffer" of the agencies and going straight to the top European brands. Google's got the tech and the data - and could probably deliver better results. What to do? Make yourself relevant before it is too late. Innovate. Invest in technology. Are we getting carried away? In fairness, agencies are doing all these things already. We are still at the start of this automation process in display. And as one sage industry stalwart told me yesterday, the industry needs to stop whining about Google and get on with developing better solutions and tech for its clients. It was a good post by Jerry, but now that we know the big G's strategy let’s see if the rest of the industry can outmanoeuvre them.