Google, MSN and the Overpayment Trend

Implications: At some point, Google has to stop overpaying for companies.  It started with YouTube, and it's continued with Doubleclick.  Now, they will also have to rely on cookies more than ever - so here come the privacy police again.  And Microsoft is very much in trouble online as a Portal.

Analysis: $3.1 Billion - that's a HUGE number and way too much.  However, it provides Google with much needed display ad management tools to better monetize their terrible & under-utilized display network.  The kicker to all this is that Google has restrained from using cookies to optimize campaigns based on conversions.  Now, they're going full steam ahead into CookieLand with Doubleclick, and there's no turning back.

The purchase also blocked Microsoft from purchasing yet another base technology - remember Massive Inc? - for too much money.  And if you look at the other key competitors in this market - Yahoo!, AOL/Advertising.com, ValueClick - they all have some form of inventory management & targeting solution.  And you guessed it - all based on cookies to track user behavior. 

Microsoft, on the other hand, has nothing close to the targeting solutions these guys have.  So what's a major portal like MSN to do?  I say fold the Portal unless MSN transforms into something else entirely (I have some thoughts).  And you think they would have learned after paying too much for Massive, Inc which is having trouble selling - and getting - in-game inventory.  Will definitely be interesting to see what happens now - who they target, how much they'll have to pay to "scare off" Google, and if that level of overpayment is justified in 5 years.  Good luck, MSN.