NEW YORK Google Inc.'s $3.1 billion purchase of DoubleClick Inc. will create a new powerhouse in digital advertising that could spur a wave of takeovers in the online marketing sector.
The planned acquisition, unveiled late on Friday, prompted a rally in shares of digital advertising companies on Monday, with aQuantive Inc. jumping 12.2 percent, Real Media Inc. up 10.6 percent and ValueClick Inc. gaining 2.3 percent.
The surge in stock prices suggests investors are more excited about the prospect of further takeovers in the digital marketing industry than the threat that the Google-DoubleClick combination could steal business away from smaller rivals.
Up and down Wall Street, analysts predicted another deal to follow Google's acquisition of privately held DoubleClick, which itself follows Publicis' $1.3 billion purchase of interactive agency Digitas Inc. four months ago.
"We expect that Google's deal for Doubleclick will benefit public assets such as aQuantive, ValueClick, and possibly even Akamai, as there is a scarcity of high-quality assets combined with an aggressively consolidating sector," Scott Devitt, an analyst with Stifel Nicolaus, said in a research note.
AQuantive, ValueClick and Real Media specialize in different digital advertising areas, ranging from online media buying, campaign design and tracking services, to providing search and display marketing. Akamai Technolgies Inc. helps speed up the delivery of digital content via the Web.
One of the most talked about potential pairings is Microsoft Corp. and aQuantive, a full service online ad agency that has a creative division, buys and sell ad space, offers direct marketing services and tracks online campaigns.
AQuantive is based in Seattle, near Microsoft's campus headquarters in Redmond, Washington. Shares of aQuantive hit a new 52-week high of $32.78 on the Nasdaq before closing at $32.01.
JP Morgan analyst Imran Khan raised his rating on aQuantive to "overweight" from "neutral" and said, "The recent Google acquisition of DoubleClick could potentially lead to more acquisitions in the space."
But other Microsoft watchers said the world's largest software maker, while lagging in the Web search market, would not necessarily benefit from buying an online ad company.
"In terms of Microsoft's advertising -- they already have a fairly stable, strong and well-established banner business," said Matt Rosoff, an analyst with Directions on Microsoft. "What they are not keeping up with is search.
"But their search engine is actually good -- what they need to do is get more users," he said, meaning the acquisition of a digital agency may not help.
Morningstar analyst Toan Tran said: "I don't think buying someone like aQuantive would help Microsoft."
With DoubleClick, Google vastly expands its Web display advertising business, which includes richer graphic and online banner ads for corporate brands, and represents half of all online marketing. Until now, display advertising has been dominated by rival Yahoo Inc..
"This may prove to be a pivotal step for Google in its quest to create something of an operating system for the entire advertising industry," Derek Brown, an analyst with Cantor Fitzgerald, said in a research note.
Both Yahoo and Microsoft had bid for DoubleClick, while Time Warner Inc.'s AOL online unit had considered a bid earlier in the process, sources have said.
Yahoo, like Microsoft, has deep pockets for an acquisition but some analysts also say Yahoo has fortified its advertising capabilities with a new ad system known as Project Panama.
Even if there are no suitors, aQuantive and others could benefit from the Google-DoubleClick deal since marketers are often wary of putting too much control in the hands of one advertising company, analysts said.
"We believe that Google's acquisition of DoubleClick could lead to a backlash from ad agencies and some publishers due to conflicts of interest," Richard Fetyko, an analyst with Merriman Curhan Ford, said in a research note. "If acquired by the largest online media company, DoubleClick loses the independency that ad agencies seek."
(Additional reporting by Jim Finkle in Boston)