Google has announced that it will sell Performics, the search engine marketing arm of Doubleclick.

As we reported March 12, Performics presented a major conflict of interest for Google as the service offered SEO services that were focused on improving site rankings in Google.

Tom Phillips, Director, DoubleClick Integration at Google wrote on the Google Blog:

It’s clear to us that we do not want to be in the search engine marketing business. Maintaining objectivity in both search and advertising is paramount to Google’s mission and core to the trust we ask from our users. For this reason, we plan to sell the Performics search marketing business to a third party. We believe this will allow us to maintain objectivity and the search marketing business to continue to grow and innovate and serve its customers. While we have not yet identified a buyer, we’ve received preliminary interest from a number of our current partners. Search Marketing will continue to run as a separate entity until the division is sold.

Phillips noted that Google will keep the affiliate marketing arm of Performics and integrate it into existing Google services.

As we reported yesterday, Google has now successfully acquired DoubleClick after receiving EU approval for the deal. While the focus has been rightly on display advertising, many have missed one part of the deal that will raise eyebrows: Google now owns SEO service Performics.

DoubleClick’s Performics offers search engine services that include “natural search solutions” such as “link building.” Some highlights from the Performics service

Our experts methodically optimize copy and content for each page to boost page rankings…

Addresses external ranking factors and new business opportunities

Now there is nothing wrong with what Performics offers; SEO and SEM are legitimate businesses. The catch is that Google is now offering paid services that promise improved search engine listings in Google itself, a 100% conflict of interest. Danny Sullivan at Search Engine Land calls for Google to divest itself of Performics, and it’s a call that should be supported.

Online advertising firm Eyeblaster has registered for a $115 million initial public offering on the NASDAQ. Lehman Brothers and Deutsche Bank Securities are serving as joint bookrunners with UBS Securities and Pacific Crest Securities as co-managers.

New York based Eyeblaster offers online campaign management solutions and services to advertising agencies and advertisers. Eyeblaster manages campaigns across digital media channels in multiple formats including rich media, in-stream video, display and search.

Eyeblaster’s major competitors include Google through DoubleClick, and Microsoft with Atlas.

The company was founded in 1999 and has 221 employees in 23 countries with R&D facilities in Israel. The company booked a $7.4 million profit in 2007 on revenue of $44.7 million from 979 customers.

(via CNN)

As we reported December 20, the last hurdle to Google’s acquisition of Doubleclick now rests with the European Union after obtaining approval for the merger in the United States.

One company petitioning against the acquisition is Microsoft. The NY Times has a copy of a leaked Microsoft document here (.doc) that details in dot points the case against the acquisition. One choice quote:

By acquiring the dominant provider of ad-serving tools that publishers use to manage and make their inventory available to advertisers, Google will force other online ad networks to build and market their own ad-serving tools. Unless and until Google’s competitors are able to obtain access to competitively neutral and unbiased ad-serving tools like those currently provided by DoubleClick, the ability of Google’s rivals to create viable alternative pipelines will be very difficult, if possible at all. Moreover, by the time competitors are able to assemble their own pipelines, given the network economics that characterize online advertising, Google likely will have obtained in non-search advertising the same unbeatable market position that it now enjoys in search advertising.

And then there’s the Powerpoint slides. Here’s Microsoft’s case in pictures:

As Erick previously noted: “The European Commission won’t bow out so easily.” The EU has a much stronger track record against anti-competitive behavior that the FTC has under the Bush Administration, and with Microsoft spending time and money lobbying against the deal it would a brave person who bets that Google is assured of getting unconditional approval for the acquisition.

(slides via Slashdot)

As we noted earlier, the FTC has indeed cleared Google’s $3.1 billion acquisition of DoubleClick. Notably, the FTC required no conditions for clearing the transaction, which is a big win for Google. It won’t have to sell off any businesses or change any of its current business practices. Google’s chief legal officer David Drummond gives a rundown of the reasoning behind the FTC’s decision:

Third party ad serving markets are highly competitive. [No argument there].

Privacy not a part of the merger review. [You lucked out, boys].

Data combination wouldn’t pose problems. [That means Google won't be hobbled by any separate-but-equal clauses keeping Google and DoubleClick data apart, which would have probably squirreled the deal].

Advertisers and publishers aren’t concerned. [Well, at least not enough to complain publicly about it to the FTC].

Now that the U.S. is cleared, Google still has its toughest hurdle ahead. The European Commission won’t bow out so easily. It could very well delay a decision until April. (Those Old World regulators like to take things at an Old World pace). In the meantime, Microsoft will keep trying to steal away more business from DoubleClick, as it did yesterday with its Viacom deal. Oh, and it will be spending a lot of time lobbying its good friends at the EC as well. The longer the delay, the more Microsoft can use that time to try to catch up. But come April, DoubleGoog will start to punch back.

The Federal Trade Commission (FTC) will rule in favor of Google’s acquisition of DoubleClick, possibly as soon as this week, according to sources quoted by Bloomberg.

The FTC has been investigating the acquisition on competition grounds since it was first announced in April. A number of high profile respondents argued against the acquisition, including AT&T and Microsoft, and in July Scott Cleland of telecom research group Prescursor presented a strong case arguing against the merger.

At the time we noted:

The FTC has acted against anti-competitive behavior in the tech industry before (most notably with Microsoft), however the FTC under the Bush Administration has become far more laissez faire towards business practices than it was in the past. It won’t be all clear sailing for Google, but given recent history it would be surprising if the FTC did block Google’s DoubleClick acquisition.

The acquisition has already been cleared by authorities in Australia, but still faces regulatory review in Europe.

Google’s big move into display advertising is going to be delayed, maybe until April, if it gets approved at all. The European Commission is holding up Google’s acquisition of DoubleClick on antitrust concerns, fearing that Google’s current dominance of search advertising, combined with DoubleClick’s leading position in display advertising will create an unstoppable force.

Truth be told, that is precisely what Google is hoping for, although it must say the exact opposite to try to get the deal past regulators. Google CEO Eric Schmidt is crying that all of his rivals’ advertising deals (Microsoft-aQuantive, Yahoo-Right Media/BlueLithium, AOL-Tacoda/Quigo) have already been approved or face no similar scrutiny. But that misses the whole point of an antitrust review: to prevent the concentration of too much market power in any one company.

Those other deals don’t threaten to cement any one company’s market dominance, as the DoubleClick deal arguably does. (This must be the only time Steve Balmer is tickled that Google is being treated like the new Microsoft). There are also related privacy concerns, as tracking consumers across sites with ad cookies becomes the industry norm, but that is beyond the official purview of the European Commission.

In the U.S., the Federal Trade Commission has yet to approve the deal as well. But historically, it has been the European Commission that has always been tougher in approving big mergers because it doesn’t have as much enforcement teeth after a deal is already consummated. Its biggest influence (in terms of being able to squash a deal) is always at the initial approval stage, when it has to basically guess what the future may hold. In a sense, it is a futile exercise.

While search and display advertising may make up the bulk of online advertising today (40 percent and 22 percent, respectively, according to the Interactive Advertising Bureau), who is to say that social ads or some other as-yet-to-be invented form of digital advertising won’t sweep the world and make the DoubleClick deal irrelevant? In all likelihood, the deal will go through with the European Commission demanding a set of tough, but ultimately misguided, concessions.

Are there concessions it should demand that would make sense and promote a more competitive digital advertising market? Or should it just stop holding Google back and let the market decide who to reward and who to punish? Comments are open.