So why did they do it? And what about that huge earnout? More than a billion dollars? My God! How did that come about? (Besides, of course, dMarc’s extremely Googley “innovation through automation” tagline).
My guess is that this is an artifact of the deal. Here’s a totally speculative scenario. Either through direct intent or serendipity (ie someone says to a Googler: Hey, you guys should check out dMarc!) Google decides it wants to do to the radio market what AdWords has already done to online – and by extension, print. In other words, redefine it, make it more efficient, invert the model, all the stuff we already know. OK, fine. But Google knows exactly zip about radio advertising.
So Google approaches dMarc (or vice versa), and the meetings ensue. Visions are whiteboarded. My God! the two parties rhapsodize, we just might redefine the entire multi-billion dollar radio business!
Google goes into buyer mode. It makes a flat our acquisition offer. Maybe it was $100 million to start (that’s what the deal was for, setting aside the earnout), maybe it was for more or less. Doesn’t matter for this scenario.
What happened next is the interesting part. The folks at dMarc said, essentially, No. We’re not going to sell so cheap to Google, just because you’re Google. We have a great market position, great relationships, and the ability to leverage this company without your help, thank you very much.
Now, that’s not a response Google is used to hearing. Usually it’s more like the Keyhole response: “When Google called, I realized that I was being tapped into the great fraternity of High Holy Possibility, and I couldn’t refuse. After all, Google has the resources and market position to make my wildest dreams for (insert business here) come true.”
But the guys from dMarc didn’t see it that way. Sure, they saw the upside of plugging into Google’s infrastructure and ad network. But they also knew they could shop this deal to Yahoo, or MSFT, or AOL, or even go it alone. So they had leverage to capture the direct upside that dMarc might represent in the form of a major payout. (And, of course, when Google bought Keyhole, or other companies in the past, they could say that the options which came with the deal were going to be worth a hell of a lot. But convincing someone that your stock is going from 465 to 500 or 600 is more of a stretch….)
Voila, Google’s second major business development deal for which they had to compete (first, of course, was AOL). Once again, signs of a maturing business.