Google has extended its dominance of the online advertising market with the acquisition of internet ad network DoubleClick.

The deal is worth $3.1bn, and represents the search engine company’s largest acquisition so far, beating the $1.65bn paid for video sharing site YouTube in October 2006.

Google beat off competition from online rivals AOL, Yahoo and Microsoft to acquire the New York based ad company. Microsoft was reported to be unwilling to pay more than $2bn.

Google says the merger will offer superior tools for targeting, and analyzing online ads of all types, significantly benefiting customers and consumers.

The deal, subject to regulatory approval, was announced after the markets closed on Friday and is expected to close by the end of the year.

While Google already has a commanding position in the online ad market with its dominance of search advertising, this move will allow the company to lead the market in display advertising.

If this deal goes through, Google will account for almost 80% of ads served on the internet

Rivals, including Microsoft, who, have expressed concern that this move will give the search engine advertising giant a stranglehold over online advertising, and have encouraged regulators to take a close look at the deal.

Microsoft senior vice president Brad Smith expressed concern about the merger:

“This proposed acquisition raises serious competition and privacy concerns. We think this merger deserves close scrutiny from regulatory authorities to ensure a competitive online advertising market.”

Google chief executive Eric Schmidt played down such fears:

“This is a very competitive market and we had lots of choices when it came to this acquisition. We don’t see [the competition] concern as one that we are particularly worried about.”

The deal, subject to regulatory approval, is expected to close by the end of the year.