U.S. regulators cleared Google Inc.'s $3.1-billion US purchase of online ad tracker DoubleClick Inc. on Thursday, a key step in the internet search giant's efforts to add display ads to its online advertising business.

The five-member Federal Trade Commission approved the purchase despite protests from competitors and privacy advocates. An antitrust review from the European Commission is the final hurdle for the deal.

An approved purchase of DoubleClick, the market leader in display ads featuring pictures and video, would cement Google's position as the dominant player in online advertising. Google already dominates the market in search-based advertising.

"The FTC's strong support sends a clear message: this acquisition poses no risk to competition and will benefit consumers," said Eric Schmidt, Google's chairman and CEO.

"We hope that the European Commission will soon reach the same conclusion and we are confident that this deal will deliver more relevant ads for consumers, more choices for advertisers and more opportunities for website publishers."

The European Commission is expected to complete its inquiry by April 2.

Google, Microsoft compete for market

If approved, the purchase would almost double Google's largest acquisition to date. In 2006, the Mountain View, Calif.,-based company purchased the online video sharing site YouTube for $1.65 billion US.

DoubleClick is owned by U.S.-based private equity investors Hellman & Friedman.

The DoubleClick acquisition has faced resistance from competitors, most notably Microsoft Inc., who have argued a combined Google-DoubleClick company would greatly reduce competition in the online advertising market.

Advertisers are expected to increase their spending online by 22 per cent to $49.5 billion US next year, according to PricewaterhouseCoopers LLP.

Microsoft has recently begun its own push into the market. In May, the software company purchased online holding company aQuantive Inc. for $6 billion US, acquiring with it the Atlas ad-serving platform.

On Wednesday the software giant signed a five-year, $500-million US advertising deal with media company Viacom, which owns television networks such as Comedy Central and MTV. As part of the deal, Microsoft will sell ads on Viacom-owned websites and on Viacom content shown on Microsoft's MSN Video website.

Viacom deal highlights rivalry

Viacom's decision to replace its previous ad partner — DoubleClick — with Microsoft was seen as a message to Google.

Viacom is suing Google for $1 billion US over alleged copyright infringement by Google's video-sharing website YouTube.

Philippe Dauman, the CEO of Viacom, said the ongoing lawsuit didn't have a direct bearing on the company's switch to Microsoft, but did say it was "very important that we do business with companies like Microsoft that respect copyright."

Google argued that the Viacom deal proves that competition in the market is healthy.

The FTC, in issuing its statement Thursday, suggested there wasn't enough evidence to argue the market would become uncompetitive.

"Because the evidence did not support the theories of potential competitive harm, there was no basis on which to seek to impose conditions on this merger," the commission said in its decision.

"We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the commission intends to act quickly."

With files from the Associated Press