Why Are So Many Web Ad Companies Merging Now? (More innovation and creative destruction)

Just a few months ago, with Microsoft's Web services division still waning in comparison with its others, speculation began on whether it was gearing up to address that problem by purchasing an existing ad brokerage. The focus centered on DoubleClick, one of the oldest and most reputable display ad providers on the Web; and before too long, Google responded to that speculation by pre-empting a Microsoft takeover. That started a tidal wave of major players playing catch-up, including Yahoo's acquisition of Right Media a few weeks later.

Last week, amid speculation that Microsoft was scrambling to acquire 24/7 Real Media, another ad services firm, it was pre-empted yet again, this time by established advertising agency WPP Group. So Microsoft ended up spending its $6 billion late last week on aQuantive, which not only has its own digital marketing division (Atlas) but an online ad agency (Avenue A | Razorfish).

These acquisitions are changing both the structure and dynamics of the Web, and will impact not just the way we do business but, to a real extent, the way we generate business online. But will the changes we see resemble what these major players actually have in mind? The business press touts the deals as big fish swallowing big fish to get bigger.

But as history taught us -- more accurately, as history has left indelible marks on our behinds to remind us forever -- the cumulative power and capital of Web-based companies too often add up to less than the sum of their parts.

Besides, if so many ad services companies have the objective of reaching out to the same Web users anyway, then how is their reach extended merely by their having combined?

Inventory is hotly contested — I went to Ad-Tech in Chicago a year ago and seemed as though 3/4 of the people on the convention floor were either shopping impressions or trying to buy them for ad networks.

As an advertiser I felt a little locked out — it seemed as though the networks had more than enough demand and didn’t care to talk if I couldn’t sell them impressions.

Thanks - this helps me make sense of the mergers.

... As a portal to the rest of the sites under the Yahoo domain - and there are thousands of them - the home page becomes less and less effective, and advertisers are realizing this. ... ... So that's what's taking place here, in my opinion: We're putting the structures in place to buy across literally tens of thousands of destinations on a global basis. And that's exactly what we should be doing, because that's new media." ... ... As a result, the importance of the "top 10 domains" may lessen over time, as the quality of content takes precedent over the capital structure of its publisher. ... ... Advertisers have placed too much faith on the nature of the Web to behave like the nature of its media predecessors in print and broadcast. But the old dynamics simply no longer apply.
"It is time to get over the idea that the Internet should behave like ABC, CBS, and NBC," remarked Coffin. "We were constrained by technology in those days, and there were 24 hours in a programming day, [so] whatever you wanted to watch, it was appointment media. We brought those ambitions and that mindset to a new media environment that was completely at odds with them. And the new network of the new information age isn't about lots of people in one place. It's about lots of people in lots of places. And this solves a very important problem for both advertisers and consumers." ...

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