Google spends oodles again

The online juggernaut on Friday said it reached an agreement to acquire DoubleClick Inc., a New York-based Web advertising company, for $3.1 billion in cash.

If approved by federal regulators, the deal would be the largest in 9-year-old Google's history, and the amount more than double what the search engine giant paid for YouTube in November.

DoubleClick would boost Google's expansion beyond the simple text ads that generated the vast majority of its $11 billion in 2006 revenue.

The deal also shows Google's willingness to use its financial muscle to snatch strategically important targets from competitors. Microsoft Corp. reportedly had been bidding for DoubleClick, whose technology enables ad agencies to place banner ads on many popular websites and measure marketing campaigns.

"Google is more than the 800-pound gorilla; they've become the 8,000-pound gorilla," said investment banker Ken Marlin, using a term once reserved for Microsoft. "They can outbid anybody. Google has become a veritable cash machine. At this point, Google has enough purchasing power to buy up small countries."

Mountain View, Calif.-based Google would pay nearly three times the $1.1 billion DoubleClick was sold for just two years ago when it went private.

Google Chief Executive Eric Schmidt, in a conference call with analysts, defended the cost as a worthy investment.

"When we looked at DoubleClick, we felt after a very detailed financial analysis that we could afford the price," Schmidt said. "And in fact it is a very good deal for our shareholders."

Some analysts agreed, saying that Google could solidify its dominance as the world's biggest broker in the $17-billion Web advertising market and wring profit from DoubleClick. The acquisition also would help Google better challenge Yahoo Inc., Time Warner Inc.'s AOL and Microsoft's MSN in selling display ads.

The deal pairs DoubleClick's potent network of display advertising with Google's industry-leading network of text ads on blogs, newspaper sites and other online publishers.

"What [Google] really bought is the relationships with big website owners," said Tim Vanderhook, CEO of Specific Media Inc., an Irvine-based online advertising network. "But those relationships certainly aren't coming cheap."

Google shares, which had dropped $1.10 to $466.29 in regular trading, lost 55 cents after hours, which was when the deal was announced.