While a record 7,000 attendees roam the Ad:TECH trade show floor, stuffed together into a waxing tide of slow-motion gawking, very little hard news broke this week - perhaps because the real news isn't ready for the press releases just yet. Also attending the conference, CEOs from several major internet companies were lining themselves up so that they would be able to participate in any industry consolidation that might be in the offing after DoubleClick suddenly announced on Halloween night that it might or might not be willing to sell itself off in whole or in pieces. As heads of other major internet firms feel the need to react to the prospect of a major acquisition, DoubleClick's release started a chain of events that could lead to industry consolidation well beyond the scope of DoubleClick.
The chumming of buyer interest around DoubleClick seems to be having an effect on the industry much larger than simply the creation of a new merger or set of spin-offs. Talking with several CEOs Monday and Tuesday at Ad:TECH who each planned to make bids on parts of DoubleClick, it quickly became apparent that they had set into motion at their various firms the strategic decisions that would cause them to consolidate their various pieces of the industry, whether they wound up winning a part of DoubleClick or not.
Three of the four CEOs interviewed were in the process of seeking venture or bank funds so that they would be able to finance a purchase. The fourth ran a company with excessive cash reserves, but had engaged his board of directors in a far-ranging strategy formulation discussion that, if approved, commit him to buying one of the major firms in a category his company currently doesn't serve. All company chiefs said that, once decided, they will have staked significant credibility on the notion that they needed to buy up smaller players. When asked specifically, most indicated that if they failed to win a bid for a piece of DoubleClick, that credibility could be retained in full only by substituting another firm for the one lost at auction. In fact, two of the CEOs said that they would likely try to engage another firm in acquisition talks so that they would have a better negotiating position when trying to deal with DoubleClick, or to ensure that they had a potential partner if DoubleClick opts not to sell a particular piece in the fashion their companies desire. DoubleClick, for its part, has always said that it is merely exploring whether some of these options might unlock shareholder value, and that it has not made a decision to sell any element.
Sensing impending consolidation, two other company CEOs, one a chief of a smaller firm, one the head of a mid-sized firm in an extremely narrow category, both said they were attending Ad:TECH to meet with people potentially interested in purchasing their companies. Neither attributed their interest in selling to a DoubleClick-triggered event, but both did say that the writing was on the wall that bit players will find it harder and harder to compete successfully against established players. Marketers and publishers both are known to favor larger and more established firms, even in the face of inefficiencies of scale and the creation of cartels or monopolies.
Meanwhile, downstairs, the clockwise motility of the trade show floor continued, the tide of marketers lapping up against innumerable competitors in narrow categories, especially in cost-per-click networks, search firms and companies expanding their existing email and other ad technologies into service offerings. The feel is different from 1998, when hype and hipness brought a brief gold rush to the online marketing industry - and Ad:TECH. Today the excess was more of quantity, the companies were seeking to make money, but they were just too tiny, too pretty and too many.
