The story says the data exchange is known internally as “DDP,” and, according to comments made by Google ad chief Neil Mohan, it sounds like this ability for publishers and advertisers to capitalize on user data will be baked into a variety of products, rather than existing as a standalone offering.

Mohan was quoted as saying, “If our vision is a comprehensive one, it needs to contemplate data in addition to ad inventory. We are working on initiatives to help publishers and advertisers do just that.”

Google already has investments in a lot of areas where it would make sense for more data capabilities to be included. The company runs DoubleClick, including the DoubleClick Ad Exchange, along with Invite Media and Teracent. The announced AdMeld deal, currently under federal review, is another piece of the puzzle.

“We talk to customers a lot, and, over time, it became clear that we have not invested enough in this project,” acknowledged Ariel Bardin, lead product manager for DoubleClick for Search (DFS), adding that the company would now give “significant focus” to the product.

Bardin told me that the previous version of DFS “felt more like web 1.0,” and said the company built the new iteration from scratch, using the Google technology stack. Now the interface looks more like AdSense, but it allows large agencies and advertisers to manage their search campaigns across Yahoo and Bing, as well as on Google. Bardin says the company hopes to eventually add international search engines, and will consider adding social networks if it sees interest from customers.

The changes in version 3 focus on improving workflow, reporting and functionality. In the workflow arena, the tool now will let agencies upload campaigns in spreadsheets with up to a million rows and manage campaigns globally. Users can also go into the AdWords or AdCenter interfaces directly, and make changes that are then synched back with DFS — previously the synch was only one way.

Reports now include more powerful filters and labels, and reporting that integrates with DFA. Optimization capabilities now include the ability to optimize to a certain position or optimize by a certain cost-per-acquisition goal, or some combination of both.

Importantly, all of the data is synched every half hour with the new version. Previously, they only pulled back data from the search engines once a day.

The product is priced based on DoubleClick getting a percentage of media spend.

To that end AdAge reports that Google is prepared to integrate display advertising beyond YouTube across its various properties including, potentially, Google Maps and Gmail:

But perhaps the more significant strategy on display was [Google VP Neal] Mohan’s presentation of what he called the Google Display Network, which included YouTube as well as Google properties Google Finance, Google Maps, Google Books and even Gmail. Mr. Mohan did not detail what a display unit might look like in Gmail, and a company insider said it has yet to work out the specific ad requirements against those properties. Google Finance, for example, did not initially feature advertising, but it now runs rectangle-sized ads.

Nothing of course has been formally announced but Google’s Mahon was speaking at a “press briefing,” which suggests these ideas are fairly developed internally. (See postscript below for clarification after conversation with Google.)

Mapquest recently toned down the number of ads it shows on its site, though it still has a single large display ad. And one of the unfortunate features, in my opinion, of Yahoo Mail is its display advertising. Yet Yahoo Mail generates huge impression volume for the company and is a prime outlet for its behavioral targeting.

Google needs to be careful in executing such a plan. Even where “relevant” display ads can be annoying (think Facebook).

The industry has often turned to behavioral targeting to remedy what are otherwise creative deficiencies in display. If Google similarly starts pushing mediocre ads into its various properties, including Maps and Gmail, they will become considerably less desirable to use.

—–

Postscript: I received a call from Google that sought to clarify what was announced. I was told that the Google Content Network has been re-branded the “Google Display Network.” This already includes properties such as Maps, GMail and others of course.

Google said that some properties within the Google Display Network will receive only text ads and won’t see rich media or traditional display units. So there may be no changes to ads shown in Maps or Gmail and elsewhere.

The AdAge story suggested the opposite and apparently got it wrong.

First there were ad networks, then ad exchanges to make buying across networks more efficient. And now there are so-called “demand side platforms” such as Invite that help marketers and agencies buy across exchanges to target and consolidate audiences.

According to AllThingD’s report, Invite will operate at “arms length” from Google’s ad exchange and will continue to work with the other exchanges: Yahoo’s RightMedia, Microsoft’s adECN and others.

Reportedly the Bid Manager platform will eventually be integrated “seamlessly” into DoubleClick’s ad serving platform.

Google is emerging as a display powerhouse, with DoubleClick and its related exchange, YouTube and now AdMob in mobile.

Google explained:

DFP comes in two flavors, tailored for different publishers’ needs: DoubleClick for Publishers, for the largest online publishers, and DFP Small Business, a simple, free version designed for growing online publishers. We’ll be upgrading current DART for Publishers publishers to DoubleClick for Publishers over the next year as we continue to add features and modules, and we’ll be moving Google Ad Manager customers to DFP Small Business in the coming weeks.

New features for DFP include:

• A new interface that has been completely redesigned to save time and reduce errors.
• Far more detailed reporting and forecasting data to help publishers understand where their revenue is coming from and what ads are most valuable.
• Sophisticated algorithms that automatically improve ad performance and delivery.
• A new, open, public API which enables publishers to build and integrate their own apps with DFP, or integrate apps created for DFP by a growing third-party developer community (apps under development today include sales, order management and workflow tools).
• Integration with the new DoubleClick Ad Exchange’s “dynamic allocation” feature, which maximizes revenue by enabling publishers to open up their ad space to bids from multiple ad networks. Dynamic allocation is described in this document [PDF].

Here are some bits from the article:

Sprint is buying the top ads tied to phrases consumers tend to search for when they are close to making a purchase, such as “cellphone rate plans” and specific products like “Samsung Reclaim,” rather than more generic phrases they search for at the beginning of the shopping process, like “Sprint,” “AT&T” and “cellphone”  . . .

Volkswagen is coordinating its search marketing strategy with its network of 600 dealers across the country so it doesn’t end up competing against itself for the same terms and driving up prices…

[N]ew research from the search division of GroupM Search (a media buying and planning unit owned by ad holding company WPP) and online measurement firm comScore [ ] shows that consumers exposed to social media campaigns are likelier to search and click on that brand’s paid search ad.

“A few years ago, search was a little bit more progressive. Now, it’s mainstream,” says Simon McPhillips, director of media at Sprint. “The incumbents are trying to figure out, ‘What is the next new frontier?’

None of this is a surprise, nor do the examples above represent incredible sophistication on the part of marketers. It does however represent a widening of the “aperture” around search and search user behavior. As much as it may be driven by economics and not wanting to compete on brand or “generic” terms, which still constitute the majority of search queries, it reflects a better understanding that search queries occur in a larger context — of social media, display, traditional media and word-of-mouth-like viral behavior.

The article also speculates about how such trends are causing some slowing of search-ad spending at Google and how Google is pushing into other areas (display, video) as higher growth opportunities, as a consequence.

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.

Fast Flip is a new reading experience that combines the best elements of print and online articles. Like a print magazine, Fast Flip lets you browse sequentially through bundles of recent news, headlines and popular topics, as well as feeds from individual top publishers. As the name suggests, flipping through content is very fast, so you can quickly look through a lot of pages until you find something interesting. At the same time, we provide aggregation and search over many top newspapers and magazines, and the ability to share content with your friends and community. Fast Flip also personalizes the experience for you, by taking cues from selections you make to show you more content from sources, topics and journalists that you seem to like. In short, you get fast browsing, natural magazine-style navigation, recommendations from friends and other members of the community and a selection of content that is serendipitous and personalized.

Here are some screenshots provided by Google, which look quite similar to the originally leaked screens from the earlier “Flipper” rumors:

According to Google’s Marissa Mayer, Google co-founder Larry Page said, “Why isn’t the web like a magazine?” and wanted a way to browse it. Well, Fast Flip lets users visually browse (as well as search) news. There’s also personalization; the site makes recommendations based on your clicks, searches and other behavior.

When you click on any of the stories, you’re taken to publisher sites, which makes them happy. Speaking of which, Google’s initial publisher partners include the NY Times, Atlantic Magazine, Washington Post, Fast Company, ProPublica and Newsweek.

Google is banking that an improved user experience will mean lots of traffic and page views. Google says that revenue generated from ads on the site will be split with publishers. (This could potentially be a goldmine of display inventory for Google if it expands the content from news into a broad range of magazines.)

If it’s a hit, this probably becomes the successor to Google News. And it may be the testing ground for the potential “micropayments platform” that Google is developing for content publishers — it’s all coming together now. I’m only partly kidding with that remark.

We haven’t yet had a chance to try the site but it looks like a much richer and more interesting way to consume news than, well, Google News.

Google says there’s also a mobile version “with tactile page flipping,” for the iPhone and Android.

Brad Bender, Google’s Product Manager in display offerings on Google Content Network, explained that Google is looking to make ads “more interesting” to users and more effective for advertisers. Interest-Based Advertising allows Google to do that by giving users control over their interest categories and advertisers the ability to target based on those categories and user’s previous actions.

Interest based categories are based on the type of web site a browser visits. For example, if a user visits ESPN often, Google will know that user is interested in sports. Bender told me Google currently has 30 top line categories and about 600 detailed categories. In addition, users have control over these categories and can add or remove categories in the user ad preferences section at google.com/ads/preferences.

Previous interaction is the second area of Interest Based advertising where Google is able to show ads to users based on their browsers previous interaction with that advertiser. For example, if a user had a product in their shopping cart and did not check out, the advertiser can display ads on other sites, within the Google network, that promote that product or that product line. This is Google leveraging their DoubleClick technology from the acquisition in April 2007.

I asked Google how detailed can these ads get? I asked, can an advertiser pass along a specific ad to a specific user? For example, can I show an ad for the Sony HDR-XR200V if this user added the Sony HDR-XR200V to their shopping cart on my site but did not check out? Bender said yes, but ultimately it is up to the advertiser how specific they want to get with those ads.

Initially, those advertisers included in this beta will have a special portal to manage these ads. But ultimately, it is Google’s goal to build the solution directly into the AdWords console. A larger launch will be made later on in the year, after Google works out any bugs or kinks in the system.

The nice thing about this ad solution is that the end user has control over what ads they want to see. At the google.com/ads/preferences section, a user can add or remove interest categories to fine tune the ads they see, or they can completely opt out of these tailored ads. In addition, Google will have two opt out methods. The first is cookie based that will set a cookie on the browser that will opt out the user of these ads for as long as the cookie is on the computer. The second is a long term cookie based on a browser plugin that allows the user to opt out forever, as long as the browser plugin is active. This browser plugin is available for Internet Explorer and Firefox and is coming soon for Chrome.

As many of you know, Yahoo is big into display ads. Google is kind of new to this area and this may be considered Google’s big push into this area. This program does include both the display ad and text ad business, but is completely separate from search. That means, search history is not tied to these ads in any way. In addition, Google thinks they have ad advantage on the technology side. Bender told me Google has a lot of experience understanding the context of the page, plus they can use statistical algorithms to figure out the right frequency and recency and leverage based on buyer cycles. In addition, Bender told me, Google’s content network has a reach of 74% globally, according to comScore. Finally, Google is giving users control over the choice of the ads and privacy through the ad preferences area.

Here are some screen captures of the ad preferences screen:

Here is a screen capture of the advertising cookie opt-out plugin page:

If you want to be part of this beta, Brad Bender suggests you contact your Google account manager. The beta is a very limited test right now and Google does hope to expand it later on this year.

Finally, here is a four minute video on this new Google product:

Postscript from Greg: Google’s foray into behavioral targeting (BT) in the past had been limited to “previous query targeting,” where one might see text ads on Google.com results relevant to prior searches. As Barry discusses above, this move is an enormous step for Google, in my opinion, and it’s the fruit of the DoubleClick acquisition. It also seems like it means the beginning of the end for contextual targeting, which is going to be less effective in most cases.

No one should be surprised by this move, although it will trigger the usual “big brother” reactions. I don’t want to be dismissive of privacy concerns surrounding Google but stepping back, Yahoo and AOL have been using BT for a very long time. And Yahoo has stepped it up recently to incorporate search queries into the BT targeting mix.

To Google’s credit the ability to specify one’s interests and opt out of BT here are innovative and provide a bit more transparency to the program (something that Google must do given its position in the market). These features, to the extent they’re used, could also make the program more effective. I’m particularly interested in the ability to select ad preferences here and what it may represent for the future of online — and mobile — advetising.

Although in the beginning this feature is unlikely to be heavily used, conceptually it represents potential solution to the privacy problems that have dogged BT recently. The FTC has (for now) left it up to the industry to self-regulate guidelines on BT and privacy. But it has effectively said we’re still on the case and watching closely. And in a more regulation friendly political climate things could change over the course of the next year.

There are lots of privacy studies that show consumer discomfort with tracking and targeting (despite consumer desire for only relevant ads). Most recently Burst Media (n=4,000 US adults) found that consumers are now almost paranoid about tracking and don’t like BT:

• Over 60% of respondents are aware of the tracking, collecting and sharing of information that occurs as a result of online activities.
• Respondents do not see value in ads targeted to them based on their web surfing behavior – even if it improves their web surfing experience

Burst found that “based strictly on a description – advertisements more relevant to interest – only one-in-five (23.2%) respondents would not mind if non-personally identifiable information was collected if ads were better targeted.” This is one survey but the results are generally supported by other surveys in the recent past.

There remains a big disconnect then between the intensifying use of BT by publishers and search engines and consumer concerns about privacy. The Google approach offers a potential reconciliation of that divide but we’ll have to see how it works out in practice.

Postscript From Danny Sullivan: I’m off today, so I might come back and add more commentary to this huge change for Google in the future. For now, two notes.

This is a further extension of Google’s “ads everywhere” changes over the past few months (see Drill, Baby, Drill: Google Finance Gets Ads; Google News Testing Them). Google could have been doing behavioral targeting long ago, even without DoubleClick, but the company has seemed hesitant to do so in my opinion because the privacy worries it would have raised weren’t worth the potential revenue.

Indeed, back in 2007, from Google: Not Ready To Behaviorally Target, Google’s position then was summarized as “shying away” from building profiles, with Google’s Susan Wojcicki saying:

“We believe that task-based information at the time (of a user’s search) is the most relevant information to what they are looking at,” she said. “We always want to be very careful about what information would or would not be used.”

But by the following year, Google took part in an FTC hearing about behavioral targeting. Despite the fallout ISPs that wanted to behaviorally target have taken, Google seems like it can no longer afford to ignore this area.

The ads in the current program do not appear to be using past search data as part of building profiles. However, Google confirmed in a session I moderated at the Omniture Summit last month that they have tested behaviorial targeted ads using past search history data. Again, that doesn’t seem to be part of this release, but it could come in the future.

Finally, the use of an opt-out is important. It should help save Google from the fire ISPs took, given that their customers didn’t have an easy option. How clearly that opt-out is displayed will be crucial to help it navigate through the inevitable privacy concerns that will come up.

Taking the new display ad builder first, it offers an apparently very simple way for anyone to create an online display unit (or units plural). Of course, once created, those ad units can be served wherever AdSense may go. Here’s a short video demo:

Click here to view the embedded video.

Depending on your point of view this is either validation of AdReady or an “AdReady killer.” AdReady targets small business (SMB) advertisers who don’t have agencies to build their creative (akin to what SpotRunner, Spotzer and others are doing for video). It will be interesting to see who adopts this tool. Notwitstanding the fact that most of Google’s advertisers technically qualify as SMBs, small businesses are very difficult to acquire as advertisers. This is also AdReady’s problem with a self-service offering.

Alternatively, will larger advertisers wind up using this tool? It’s not clear. They have agencies to do this. But some number of marketers will undoubtedly take advantage of it however.

In general display and CPM advertising has been on a flat-to-downward trend online. It’s much softer than search for example in this recessionary economy.

One of the reasons is that there’s an excess of supply. It’s also true that the industry has standardized around the click as the measure of value. That’s shortsighted. Clicks don’t reveal branding impacts and other latent and less tangible effects of online display advertising. Plenty of research has shown the benefits of running search and display campaigns together. (My Search & Display panel went into this in detail at SMX East.)

Perhaps Google is hoping to promote this notion of search and display working together and bring some SEM folks over to display. Yahoo, for its part, has been discussing the relationship of search and display for years. Being able to offer both to realize their combined “synergies” was one of the stated reasons why Yahoo didn’t want to sell its search business to Microsoft.

As with any Google announcement there’s always the question of who it will negatively impact — more sensationally “kill.” I’ve already cited AdReady as a potential beneficiary/victim. Whether this will affect Yahoo, the online display king, is another question. (AOL’s Platform A/Advertising.com is another that could be impacted.) The earlier entry of MySpace and Facebook into the online display market created competition and put downward pressure on CPM ad rates.

A conceptual cousin of Google Display Ads is TV Ads. TV Ads aren’t all about branding; they can have direct response elements too. But both Display Ads and TV Ads are more about branding than they are direct response.

On the latter front, Google announced a deal with Harris Corporation, which helps manage TV inventory for various media companies. This deal (from a publisher perspective, AdSense for TV) is very much like the value proposition Google offers to newspapers with Print Ads: TV companies and broadcasters (publishers) get access to additional advertiser inventory (and revenue) that they don’t have to sell. Google TV advertisers get additional distribution.

Both AdSense for Display and AdSense for TV aim to give more options and more tools to both direct response and brand-oriented advertisers. They also aim to further broaden Google’s reach — into different ad categories and advertiser budgets.

Postscript: Google Appoints DoubleClick Boss to Oversee Display Ads covers how former DoubleClick chief executive David Rosenblat has been named into the new Google position of president, display ads, a further sign of how seriously the company is taking the display ad space.