Google flexes its advertising muscle with $3bn takeover

Google has tightened its grip on the global online advertising market with the $3.1bn (£1.6bn) takeover of DoubleClick, the US-based internet marketing group.

The all-cash deal is Google's largest acquisition in its short history. The takeover will allow the company, which dominates the search-based advertising market, to also claim leadership in the display advertising arena. But at the same time it will lead to renewed claims that Google has a stranglehold over internet advertising.

Banner advertising on websites is seen as less effective than search-based advertising because often the product or service being promoted is not relevant to the consumer. However, Google will use its technology to match content with DoubleClick's banner advertisements. So, for example, a football website might carry a banner ad for a sports retailer.

DoubleClick will also assist Google as it seeks to move into the print, radio, video, mobile and TV ad markets.

Eric Schmidt, chief executive of Google, played down fears that the acquisition of DoubleClick was anti-competitive. "This is a very competitive market and we had lots of choices when it came to this acquisition," he said. "We don't see [the competition] concern as one that we are particularly worried about."

Sergey Brin, Google's co-founder and president, technology, said: "It has been our vision to make internet advertising better - less intrusive, more effective and more useful."

Google purchased Double-Click from Hellman & Friedman, the US private equity group, which had paid $1.1bn for its majority stake in the company in 2005. According to US reports, the search engine defeated Microsoft, Yahoo and Time Warner AOL in the auction to buy DoubleClick.

Founded in 1996, DoubleClick offers a digital marketplace that connects advertising agencies, marketers and website publishers seeking to place online ads. It has more than 1,500 corporate clients, and in March hired the investment bank Morgan Stanley to help explore its options, including a possible stock market listing. Based in New York, the company is the most successful internet start-up to emerge out of so-called Silicon Alley, the downtown Manhattan business community.

Shares in Google, which dipped $1.10 in regular session trading on Nasdaq ahead of the news, fell another $3.28 to $463.01 after the DoubleClick acquisition announcement, a 1 per cent decline on the day.