Will Google’s dMarc Debacle Hurt Future Deals?

    February 15, 2007

Word came out last weekend that brothers Chad and Ryan Steelberg, who founded radio advertising company dMarc and then sold it to Google, have left Google just a year after the deal. Google bought dMarc for $102 million, with as much as $1.13 billion extra coming if certain revenue targets were met. Google’s Audio Ads program didn’t even come close to getting the brothers the big payout they’d expected, so they left extremely dissapointed, with about $200 million.

What went wrong? Obviously, people at both dMarc and Google felt dMarc’s technology was capable of reaching those revenue targets, and the fact that they didn’t was a failure on someone’s part. The fact that it took most of the last year to even launch a pilot program didn’t help, and dMarc’s founders blame Google’s single-minded focus on automating everything.

In the ad business, while automating has made Google a lot of money on cheap ads, more expensive ads are typically sold by a sales force, which pitches to companies and gets them to deliver the check. dMarc believed its sales force could have been extremely successful, but Google wanted everything automated, and they never really had a chance. I guess Google’s okay with hiring thousands of people per quarter, so long as those people don’t have to do specific sales work.

Anyway, the question facing Google in the future is whether companies will be willing to deal with Google after this. It’s silly to suggest that companies will stop selling themselves to Google, since most people like money, but I bet it will be a long time before a deal is again based 90% on revenue goals. In the future, Google will have to buy companies for perceived worth, paying upfront, since no one is going to trust them to actually turn the acquisition into a success.

Don’t be surprised if most of the deals Google makes in the future are speculative deals like the YouTube deal, where the company being bought has a lot of potential and a huge price tag. Google could have bought YouTube for $100 million plus $2 billion based on revenue goals, but the YouTube guys would have been idiots to take a deal like that. After this dMarc thing, no one is going to take a deal with a lot of revenue goals, because no one thinks Google can make them.

One last thing: Is Google developing their products like Microsoft now? All of their new-medium-type ads, from radio to print to video, all are plodding along. Is their product development process already as slow and mired in indecision as Windows Vista’s was? If that is true, it basically means Google is aging more three times faster than Microsoft did, and that doesn’t bode well for the future.



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About the Author

Nathan Weinberg writes the popular InsideGoogle blog, offering the latest news and insights about Google and search engines.

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