Google has created a new instant auction — a stock market of sorts — for unused ad spots around the net, marrying its ubiquitous text ads with the banner display business it bought through its recent $3 billion purchase of DoubleClick.
The creation of the DoubleClick Ad Exchange was inevitable for Google, which is trying to find a substantial revenue source outside of its AdWords and AdSense products, services that account for 97 percent of the company's 2008 revenues of $21 billion. That search has become increasingly urgent as some believe Google has hit or is nearing peak text-ad revenue. In March, Google started mining users' histories to serve ads, something it promised for years never to do.
Not surprisingly, DoubleClick AdExchange is going to be one of the places where Google will experiment in figuring out how to wring dollars out of all the data on users it has been collecting for a decade.
The idea?
Even after publishers such as Wired.com lock up premium ads, they are left with unfilled spots — some estimates are that up to 80 percent of available slots lack advertising. Google's DoubleClick Ad Exchange lets large and reputable publishers and content networks list those spots in real time, and let advertisers bid for them instantly, the company announced Friday.
Buyers will also be able to tap into Google's massive storehouse of knowledge on users. For instance, DoubleClick's cookies track users at the thousands of sites around the web that use its ad-serving technology, and Google is already experimenting with using YouTube statistics to profile customers for targeted ads.
Google vaulted into the top ranks of tech companies, thanks to billions made annually via small text ads sold at auction. The system relies on context — advertisers bid on particular keywords which, if found in a web search or on a an advertiser's web page, show up in search result or a web page. The ad placement algorithm doesn't care at all about the user or her history — no user profiles are involved — it's all about keywords in web pages or search strings.
Remnant ad inventory poses a huge problem for publishers, especially premium brands who are reluctant to sell extra space cheaply out of fear that its best advertisers will shift their money to buying remnant ads.
And with the available advertising space on the net growing at a tremendous clip, some see the day where advertising costs almost nothing, endangering the business models of thousands of online sites and services, Wired.com included.
But Google says part of the goal of the exchange is to expand the number of banner advertisers, by helping them create ads and making it simple for them to place ads around the net with a single account.
Existing Google AdSense and AdWords customers will get access to the marketplace through their existing accounts.
Google will find itself in competition with Yahoo and Microsoft. The former has its own ad display auction system, and has done well in the ad display market. It has struggled, however, to develop a text ad marketplace to compete with Google's and last year, attempted to turn over responsibility for filling remnant ad spots on its sites to Google.
However, the Justice Department nixed that deal on the grounds it would give Google too much clout.
Subsequently, Yahoo inked a deal with Microsoft in July, where Yahoo lets Microsoft's surprisingly good search engine Bing power its search, while Yahoo sells most of the premium ads for both companies web properties.
See Also:
- Analysis: Google's Ad Targeting Turns Algorithms on You
- EU Tells Search Engines to Stop Creating Tracking Databases
- Google Seals DoubleClick Deal, Learns More About You
- Microsoft Deal Brings Yahoo Bing, But No Zing
- Yahoo Demos Tech Upgrades, Despite Looming Microsoft Takeover
- Column: Forget Microsoft — Yahoo's Value Is Overseas
