GOOGLE is spending $3.l billion (£1.5 billion) on an acquisition that will extend its grip on the online-advertising business.

The search-engine giant is buying Double Click, a New York-based firm that acts as an intermediary in the buying and selling of web-page advertising.

Google dominates pay-per-click search-based advertising, which generated most of its $10.6 billion of revenues last year. But it trails Yahoo and others in making money from display ads, which are often used to build brand awareness.

Eric Schmidt, Google’s chief executive, said after a recent review: “We realised that the level of the display-ad business was much larger than we had thought.”

In buying Double Click from its private-equity owners, Google outbid Microsoft, which was reportedly reluctant to pay more than $2 billion.

Hellman & Friedman, a Californian investment firm, paid $1.1 billion for Double Click when it took the business private two years ago.

Schmidt declined to disclose the size or profitability of the business Google is buying. But he said returns from the purchase would be “very, very strong”, adding, “we felt, after very detailed analysis, we could afford the price and it’s a very good deal for Google and its shareholders”.

Schmidt shrugged off concerns that the acquisition could face a challenge on competition grounds. He said the display advertising market was fragmented, and advertisers and web publishers had many options.

Google and Double Click said they hoped to develop tools to enable advertisers to target their ads more effectively, and to help web publishers to generate revenue from more of their pages.

Sergey Brin, Google’s co-founder, said: “We feel the combination will accelerate the display advertising capabilities and we will be able to produce a better experience for advertisers, end users and publishers.”

Double Click is Google’s second big acquisition since September, when it agreed to pay $1.6 billion for You Tube, the video-sharing site.

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