Google's deal to buy DoubleClick for $3.1 billion (£1.65 billion) is fascinating on a number of levels, and since I don't have a single unifying interpretation of it all I'll just dive right into the specifics.

There is, first of all, the price. At $3.1 billion, DoubleClick was acquired for an extraordinary ten times revenues, and the private equity firm that bought the company just two years ago made at least three times its money. DoubleClick was an early warhorse of the internet but always seemed to be falling short of its potential. Its stock price was stagnant even as the Web 2.0 bubble began to inflate, which was what enabled the private equity buyout to begin with.

So why the huge premium now? Google wanted to keep the company out of the hands of Microsoft or Yahoo!, and it genuinely wanted and needed DoubleClick to give it a foothold in internet display advertising. And, perhaps most importantly, the company is taking the view that it might as well use its cash pile to acquire long-term market position, even if the numbers make no sense from a traditional return-on-capital point of view. That's a very unusual posture: Microsoft, when it was in a similar position in the 1990s, never acted like that, and instead ultimately returned cash to shareholders.

Throwing its cash around in that way has myriad risks for Google, not the least being that it tends to attract the attention of anti-trust authorities. Microsoft and others are already complaining to the government about the DoubleClick deal, and this may mark the beginning of an extended episode of government scrutiny of Google and its business practices. Google, in part because of a cavalier arrogance on copyright issues, had made enemies of most of the traditional media industry, and that is a dangerous game.

That DoubleClick suddenly became the hot date at the dance also says something important about the online advertising business, namely that banner advertising, aka display advertising or brand advertising, is not at all dead, despite it being declared so many times recently. Google's rise has been based on the tremendous effectiveness of its pay-per-click advertising system, but the dirty secret of pay-per-click is that it eventually hits a wall when it comes to scale.

An advertiser might get lots of customers and make lots of money paying $1 a click for keywords associated with shoes, for example, but there are only so many clicks he can buy at that price. Eventually he has to pay more, and even then might run out of clicks, and then he has to go to less relevant keywords, and they don't work as well, and pretty soon the return on ad dollars is not looking nearly as good.

Brand advertising, of course, is based on a very different premise. It's not about getting an instant response to your ad (a click) or an instant transaction. It's about building a series of associations and feelings about a brand, which will lead the customer to favour that brand when they are interested in buying that kind of product. Brand advertising is much harder to measure, but it's the bread and butter of the advertising world, and despite predictions to the contrary it will be very important on the internet as well. DoubleClick, which basically manages banner (display) advertising campaigns for publishers and advertisers, is the leader in this space, and Google felt it was worth a premium to be there.

Indeed, the deal represents a clear acknowledgement on Google's part that it's core pay-per-click, "contextual" advertising business will not support its growth much longer. It's also aiming to provide systems for buying and placing ads in other media – radio, TV, and even print – and making all kinds of acquisitions in everything from word processing systems to mobile communications.

Google is obviously in a new phase now – a very big company, with lots of products and lots of initiatives, and it will be interesting to see if it can anywhere near as effective with its new toys as it has been with the ones that it created on its own.

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Jonathan Weber is the founder and editor in chief of NewWest.Net, a regional news service focused on the Rocky Mountain West in the United States. He was previously the co-founder and editor in chief of the Industry Standard