DoubleClick’s advertising exchange has been in the works since at least 2007 and before Google acquired the company. But this morning Google is formally announcing the new DoubleClick Ad Exchange, which reflects a milestone of technology and platform integration between Google and its DoubleClick unit.
Google sees this an an opportunity to attract more display and brand ad dollars online and to boost revenues on that side of the house, where there is much more room for growth than in paid search (at least in the US business).
Some version of an “exchange” has been around for awhile at DoubleClick but mostly under the radar. However with this formal launch or relaunch Google is late to the exchange party. Yahoo with its acquisition of RightMedia in 2007 and Microsoft with its parallel 2007 acquisition of AdECN have been actively in the exchange business for a couple of years.
There are a number of others too calling themselves exchanges, including ADSDAQ, Traffiq, even AdBrite characterizes itself as an ad exchange. Indeed there may be as many as eight or more “exchanges” operating today in online display advertising. That compares with almost 400 “ad networks” of one sort or another. The promise of an exchange is greater efficiency, greater transparency, broader reach for advertisers and better yields for publishers.
Google says that it has been working hard for the past couple of years, since the DoubleClick acquisition closed, to integrate the companies’ technology toward these goals. It says it already has the majority of the top 25 online display networks signed up as well as major newspaper publishers, magazine sites and others. There’s no exclusivity dimension so publishers theoretically can participate in the DoubleClick exchange and other exchanges. But the point of an exchange is to get access to what amounts to the whole market rather than having to go from place to place to fill inventory or buy audiences.
Google says the DoubleClick exchange will be “seamlessly integrated into the AdWords platform and AdSense on the publisher side.” Here’s how Google describes the process and the benefits:
The new DoubleClick Ad Exchange has been rebuilt using Google’s technology and infrastructure. It contains a wide variety of key features that will help improve returns for advertisers and enable publishers to get the most value out of their online content.
On the “sell side”, participation in the new Ad Exchange is designed for major online publishers. It already includes a wide variety of large premium publishers including newspapers, large portals, entertainment and branded sites. In addition, ad space on Google’s third party AdSense publisher sites, representing over 76% of U.S. online audiences and 73% of global online audiences**, is being made available through the new Ad Exchange. This will increase the volume of quality display advertisers available to Google’s AdSense publishers.
On the “buy side”, the new Ad Exchange is designed for ad networks and agency networks – companies that connect web sites with advertisers. It already includes over 40 ad networks across North America and Europe, including most of the 25 largest ad networks in the US*, with more now to be added. Additionally, AdWords advertisers will be able to run ads on sites in the AdExchange, using their existing AdWords interface.
Features of the new Ad Exchange include a completely new interface; a “real-time bidding” feature to allow ad networks to use their own technology to bid on an impression-by-impression basis; a “dynamic allocation” system, which automatically generates online publishers the highest return for every impression by allocating ads to the highest-paying sales channel, based on real time data; more granular publisher and advertiser controls; payments and clearing managed by Google; and a new API to allow ad networks to extend the functionality of the Ad Exchange.
As a basic matter, to gain access, publishers need to be on a Google ad server, especially DART (the system’s not compatible with OpenX or Altas for example). And though the system uses a real-time auction for each impression, large publishers may set a minimum reserve price. Smaller, existing AdSense publishers will not be able to do the same but Google says that increased competition for their ad inventory will boost CPMs.
Invoicing and payments will be uniform and greatly simplified for both sides according to Google. And the tools will all be integrated and accessible through the AdWords dashboard.
In terms of Google’s display ad strategy — an arena where it has the potential to realize the most growth and new revenues — there are really three (or four) components: new and improved display ad formats for the content network (and integrated into search in some cases), video on YouTube and via Google TV Ads and this new ad exchange. Given Google’s reach, influence and footprint, this could turn out to be a huge new arena for the company.
Danny may weigh in on this point but on the call with Google we were struck by a kind of “bifurcation” between the way that large and smaller publishers are handled in the system, vis-a-vis transparency and minimum pricing. Larger publishers in the exchange will have complete transparency in terms of understanding Google’s share/commission on transactions. Whereas small AdSense publishers remain largely in the dark about the revenue split and won’t be able to set a reserve price.
Putting that aside, and others may have more to say on that point than I, with this announcement Google has joined the battle for display advertising dollars in earnest and signaled its intention to be a major player.