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.

It’s now a cliche to point out that consumer audiences have fragmented. However, once mighty media have seen audiences dwindle over the past five or so years. Accordingly almost all traditional media are struggling, exacerbated by the recession to be sure but caused by the rise of the internet (mobile will fragment audiences further). Many advertising sales channels are trying to respond to the audience fragmentation issue with network and/or multi-platform strategies.

Call it an effort to put “Humpty Dumpty back together again.”

Google for its part had once seen itself as a kind of media dashboard, through which agencies and advertisers could efficiently buy not only search but online display and traditional media ads such as print newspapers, radio and TV. Under the pressure of the recession the print newspaper and radio ads programs have been killed. But Google TV Ads remains.

Now as the Wall Street Journal reports Google is testing a program that allows advertisers to make a single buy that runs their ads on conventional TV as well as online at YouTube and potentially across the internet on other sites.

Google’s director of television ads, Michael Steib, said in an interview that the company is working on technology that allows advertisers to buy ads across Google TV, which sells on-air commercials; YouTube; and video on other Web sites through the same interface. Google is testing the service, called Google TV Ads Online, with a small group of advertisers, he said. People familiar with the matter say the service — which would leverage Google TV’s targeting technology — is likely to be introduced in the coming months.

The company is hoping that the new service will make it easier for bigger brand advertisers to spend across both services, which are under pressure to ramp up their business despite the sour economy.

But the feature is also part of Google’s bigger vision of tying together various platforms to make it easier for advertisers to manage and measure their spending across traditional and online media

Conceptually this is the right approach and it should be desirable to marketers who want both reach and targeting. The online component would also theoretically benefit from Google’s new behavioral targeting. But mechanically it faces challenges as the WSJ explains:

For the new effort to work, YouTube needs to secure longer-form video such as TV shows and movies, for which users are often willing to tolerate longer ads. While it is in talks with major media companies, YouTube to date has only signed a small number of full-length content deals with companies such as CBS Corp.

Whether Google TV advertisers — many of whom are just experimenting with the service — will take advantage of the online video integration remains to be seen. Some TV ads may not be suited to run before or alongside online video.

My guess is that only ads of a certain duration — say 10 seconds — will be able to effectively participate in the program. Alternatively, advertisers could have a longer conventional TV version and a shorter online/mobile version.

Google Maps recently introduced a new user interface for the Local Business Center. There were some issues with the upgrade and Carter Maslan, Google’s Director of Product Management for Local, agreed to answer some of my questions about the process in a phone conversation. Below, selected excerpts from our conversation:

Mike Blumenthal: What was the goal of the upgrade? What prompted the change?

Carter Maslan: We wanted to address usability issues to make it simpler to get through the process and having it flow on a single screen was a big driver.

Usability was the main motivator… simple things like not a big enough map to be able to accurately move the pin, having a clear sense of where you are in the process, etc. We were trying to address the flow through the enrollment to make it as fast and simple as possible.

What do you perceive to be the greatest improvements from the new interface?

We do a combo of usability studies in labs and monitor actual usage and user success rates. We look at both and try to improve the overall process. This was the first refresh of the UI in a while and was intended to pick up high payback UI changes.

There were a lot of complaints in the Maps groups over the past 10 days. What was up?

All things will be fixed very very soon and those things not yet fixed should be OK within days. We were not able to replicate the bulk upload problem. But all problems [with the new Local Business Center] should be reported into the Maps Group and we will take a look.

The Maps team read the posts about problems on the local blogs and in the groups but their heads were down. The team fixing the problems were totally heads down… so no one was available to give answers in the group.

The main point is that even if we need to work on proactive communication, the team is paying attention, and will try to do better on the communication.

Was there a change in listing policy? The Pin is now required on all single entries? What precipitated that change?

We are experimenting with how much verification vs. how much ease of use. There are variables as to when to prompt… In the past it had been too liberal, and is becoming more stringent. We are experimenting on the quality of the listings and spam. There is no hard yes or no answer to the correct structure.

Will there be some accommodations to facilitate entry for agencies and such? Will there be something like a Trusted Partner status?

We are contemplating something like the letter of agency policy for cell phone companies… we are fleshing out the details. We are interested in coming up with a way to allow people with good intentions to do so, for both bulk uploads and multiple singles entries.

We initially are looking at it primarily geared toward primary sources—like a chain. How do we make it easier for the chain to control the records even if there is conflicting info from a secondary data source?

The first step is for to us to provide simplified verification for use by primary data providers like a national business or chains. Whether it extends to other aggregators or agencies is in discussion.

We hope to have this available soon… less than a year and maybe as soon as a quarter. We are working through the process.

Are there short term efforts to integrate analytics and AdWords?

I am not on the AdWords team. We do have joint discussions on how to make everything simpler. The auction concept is difficult and there are discussions on how to simplify and to maximize an ad campaign. But for now we will stay dedicated to getting basic listings up and running.

Is there a plan to roll out the new Local Business Center interface to the international market? What is the time frame?

We want to work through the kinks in U.S. first and then do localization, but it will go as soon as things are ironed out… less than a quarter.

What percentage of total listings in Maps have been controlled by the businesses or their proxies in the Local Business Center?

No real numbers to publish… individual businesses [with entries in the Local Business Center] are in low seven figures and are growing well.

Coupons seem to be the poor step-child and they don’t get broad exposure. What are the plans for coupons?

We are talking about options to increase discoverability. One of the things being discussed, for example, would be coupons as another attribute and being able to filter on them like by neighborhood or rating.

Was there a significant increase in Maps traffic due to the increased links in the Local 10 Pack?

Part of the increase is growing awareness that users can find more local business information… awareness was a boost in and of itself. It did increase traffic.

Now that you have seen the pattern of many types of spam, is there an effort to clean out old spam in Maps?

We didn’t want to overbuild before the problem was significant, but will go back and purge bad data.

Mike Blumenthal is a student of life, political economy and local search. He writes the blog Understanding Google Maps and Yahoo Local Search and is a partner in a small web design company in upstate NY.

Search has historically been seen as a direct response vehicle and the notion that search is a branding medium has traditionally been met with considerable skepticism by search marketers, albeit somewhat less recently. In an effort to be provocative in moderating the “branding and search” panel at SMX West last month, I said, “Search is much more a branding medium than anything else.”

When I asked how many people agreed in the audience, only a few hands went up. James Lamberti of comScore then presented evidence to argue that search was in fact a powerful branding medium because of its reach, how it’s used by consumers in early stages of purchase behavior, the brand and generic category keywords used in queries, and so on.

Yet if one could persuasively argue that search wasn’t truly a branding medium before, it will become one in a much more obvious way in the very near future. Witness Barry’s post on Yahoo’s effort to put branded Honda advertising at the top of search results. Here’s the ad as it appears on Yahoo:

And here’s a video that plays over the search results when clicked:

The other interesting angle here is that TV drives the search behavior (through a prompt to “Shop Honda”) then provides for a full range of user responses and actions depending on that particular consumer’s place in the so-called purchase cycle: find offers, locate a dealer, request a quote (lead-gen).

Through Yahoo search, Honda can track the efficacy of the TV campaign (via query volume) and all the other actions the user takes, right down to the point of sale potentially. There is also a range of pricing/ad models that may be possible here: CPM, CPC, and even CPA, depending on the user action, within the same ad unit.

Google is also bringing display ads in the form of video into search. The video ads on Google will be like video in Universal Search, activated by the users and potentially “behind” a plus box.

These ads show the future of search marketing for big brands, as the engines acclimate users to seeing graphical and video ads in search results. Universal or blended search is paving the way. As Google’s Marissa Mayer said when Universal Search launched:

Well we don’t have anything to announce on that today. I do think this opens the door for the introduction of richer media into the search results page. We are now going to understand how users interact with that. And as Alan always likes to say search is about finding the best answer, not just the best URL or the best textual snippet.

For us ads are answers as well. Searching ads is just as hard as searching the Web, as searching images. And so I was hoping that we could bring some of these same advances in terms of the richness of media to ads.

Brands and agencies will welcome these ad offerings, consumers will likely respond to them if they’re not too intrusive, and ad networks should fear them because they will be far more effective for brands in the long run.

Many people think that Google is a search engine. That’s true, but it’s only part of a much larger story that Google is developing. Indeed, the company increasingly sees itself as a diversified media buying platform. Already print newspaper ad buying, radio and TV are integrated, to varying degrees, into AdWords. And last Thursday Google’s Tim Armstrong outlined a provocative and much larger vision for the company that would incorporate it more centrally into major ad agencies’ media buying and planning processes.

Armstrong, who is President, Advertising and Commerce for Google in North America, was speaking at the American Association of Advertising Agencies Media Conference in Orlando, Florida. Here’s the description of Armstrong’s session: Why Google Is Not Out to Disintermediate Agencies Google has the fifth highest market capitalization, after only nine years of existence. Tim Armstrong, Google’s North American president for advertising and commerce, will talk about the company’s plans for getting everywhere as soon as possible, and will try to convince a skeptical audience that Google will not disintermediate agencies.

What Armstrong outlined in the talk was a Google media buying and planning “dashboard.” According to MediaPost:

“It basically takes a mix of different media types and puts them together,” he said, adding that the system, which is still being developed, was part of a suite of new tools Google is building to make the lives of media buyers “easier.” The new dashboard, he said, would enable buyers to manage mixes of offline media like TV, radio and print campaigns, with their online display and search advertising, and to harness their data streams to show how one platform influences traffic to the others.

The deep level of ad-agency integration that this implies would presumably enable Google to capture a larger slice of the brand advertising pie. However, several factors might conspire against Google in this scenario:

• Agency fear and/or resistance

• Agency development of a competing system that accomplishes the same objectives
• The possibility that media buying cannot be automated to the degree Google assumes

Silicon Alley Insider also captures another level of potential resistance: “Google wants to be your media planner. And your research department. All functions that make up a big part of the giant ad conglomerates already.” In other words, these are bread and butter agency functions that bring in revenue.

Regardless, there’s a kind of “inexorable” logic to the Google cross-media dashboard. For the past several years, Google has envisioned itself as a more efficient way to buy media across the full range of advertising platforms and has very self-consciously been moving toward this goal.

Google’s Campaign Against Bad Commercials from Internetnews.com reports Kim Malone, the director of Google AdSense, as saying she wants to make TV ads less “annoying.”

When Kim Malone was questioned on how Google plans on taking the “non-intrusive” nature of search ads and contextual ads to the TV ad model, she said, “it’s going to evolve in a way that is less annoying to you and me.” She explains that by “inviting” the user to view your ad, as opposed to forcing them to see the ad, will help.

Malone explains that Google video ads are only played when someone actually takes an action to click on the ad. Google is able to track the number of ad views and if someone stops watching the ad midway through. Those metrics are valuable to advertisers, Malone said. It helps typical brand advertisers understand that they really “don’t want to annoy people.”

Nicholas Carlson of Internetnews.com ends his article with, “It’s hard to say if they want to or not [give the consumer an option to see an ad]. The good news is that they might not have a choice.”

Google may use games to analyse net users from The Guardian reports that Google is considering the idea of using gaming behavior to display targeted ads to that user. Privacy advocates are already voicing their distaste for the idea of gleaning information on users based on their gaming behaviors. To me, this is just like the Gmail ad debate, which has died down since they first launched.

Google, which is known to be interested in in game ads, has filed a patent application that Bill Slawski explains as:

Google looks at ways of determining user information for use in targeting ads, and determining and serving relevant ads in video games. They take into account a person’s interests and gaming behavior by monitoring and making inferences from their online gaming activities.

The Open Rights Group said, “I can understand why they are interested in this, but I would be deeply disturbed by a company holding a psychological profile.” The Guardian explains that Google can learn a lot about a user within one of these online role playing games such as Second Life. Google would love to show ads that are relevant to the user.

The Guardian spoke with Google, which said “it did not have any plans to roll out the technology in the near future.” When and if Google launches these ads, I am sure there will be a spark of controversy at the onset which will die down over time.

Yahoo has announced it will acquire Right Media, which operates an auction-based display ad exchange called Remix Media. The move is widely seen as Yahoo fighting back against Google’s recent plans to acquire DoubleClick, which itself is seen as Google jumping more firmly into the display ad network game. Both moves to me underscore how neither players’ own existing ad networks have apparently been good enough for their display ambitions.

Google has a massive ad network through AdSense. But that’s not display! Yes, it is.

AdSense has been offering display advertising since May 2004. That’s when advertisers were allowed to provide images and other display units that AdSense publishers could choose to carry. It refined this to allow "site targeting" on a CPM basis, back in June 2005. Those looking to push a branding message could buy impressions, rather than clicks, and have them hit particular sites (ironically, CPC and CPA pricing were both recently introduced). In November, Google made it easier for publishers to define "channels" to be targeted within their sites.

So why’s Google acquiring DoubleClick if it already has a display ad network? Good question.

In part, some see the answer as DoubleClick’s already huge base of customers, which use the company primarily as a means to serve ads on other sites, rather than to make those actual purchases. In addition, DoubleClick recently launched the DoubleClick Ad Exchange. That really is meant to be just what it says, an actual ad exchange network that DoubleClick controls. That exchange wasn’t even yet proven, but fear of Microsoft getting it and getting a step-up into the display ad network space seems to be another primary reason behind Google’s move.

Those are some good reasons, but if AdSense had been tapping into display into the way Google wanted it to, DoubleClick shouldn’t have been as necessary to Google. Apparently, it wasn’t. So as with buying YouTube when Google Video failed to win in the video space, Google seems to be tossing in the towel on AdSense being enough to win in the display ad space. That will likely include scraping the Google Display Advertising Network that it was said to be running, though Google spun when news came out of about this last November that it wasn’t a new ad network.

If Google has been weak in display, Yahoo was supposedly strong there. Or so we were told, especially by Yahoo over the years. But last year, Yahoo reported earnings hurt by a downturn in spending from auto and financial advertisers (big display buyers), and just this month, financial analysts have worried that Yahoo’s display ad growth is weakening.

Yahoo’s display network, of course, has been largely restricted to Yahoo’s own properties. Yahoo’s own properties have huge amounts of traffic, but Citigroup warned back in September that Yahoo’s collection of web properties were going to fall behind Google’s in traffic. That happened by at least February 2007, according to comScore figures – though it wasn’t much commented on. Instead, it was Google’s leaping past Microsoft to take the number one spot for having the most popular collection of web properties in the world that picked up headlines.

If Yahoo’s own network of properties is slipping, how about tapping into the web as a whole? The Yahoo Publisher Network was introduced back in August 2005 as a way to do this, as well as to rival Google AdSense. However, unlike AdSense, it remains a fairly closed beta program (you can’t immediately sign-up and start running ads — you have to be approved). In addition, it doesn’t offer any display ads, only contextual placement.

Potentially, YPN could have let Yahoo grow display ads beyond the Yahoo network of properties themselves. Instead, Yahoo’s gone the Right Media route. It purchased 20 percent of the ad network last October. The exact amount wasn’t disclosed, but the overall financing round raised $45 million — so that would be a top line figure.

Today’s move gives Yahoo the rest of the company for $680 million split between cash and stock. Yahoo CEO Terry Semel blogs a bit more that this is a democratic move for ad sales:

We think supply and demand should be regulated by the marketplace, not a closed platform. Right Media provides a democratic model that empowers advertisers with all of these benefits. We think our open approach is a clear differentiator from others in the industry and will provide significant benefits to publishers and advertisers.

Excellent. I’m not familiar with Right Media purchasing, but I trust their will be no minimum CPMs set in this new democratic system? And if arbitragers figure out how to make more off the ads even if the quality of their traffic isn’t so great, Yahoo will let the marketplace set that demand? Heh. I’m sure democracy in the system, if not already regulated, will be to some degree. Let’s not get too starry eyed here.

Right Media also blogged about the planned purchase. Right Media’s Big Ambitions from BusinessWeek is a fresh look at Right Media overall from March, for those looking for greater background on the company. See also discussion across the blogosphere on the purchase via Techmeme.

Google Buys DoubleClick for $3.1 Billion from the New York Times has news that Google has reached an agreement to buy DoubleClick for the sum of $3.1 billion. There was speculation in the past that Google and DoubleClick were in talks, so now that has been confirmed. With this purchase, Google now has access to DoubleClick’s ad management software and its base of web publishers, advertisers and ad agencies. See also the Google Blog announcement, the press release and related discussion via Techmeme.

Postscript From Danny: The purchase also means Google will gain Performics, an internet marketing firm with a large focus on search marketing. The FAQ (PDF format) about the purchase says Google has “no plans to dispose of it at this time,” which is somewhat amazing. It’s inconceivable that Google thinks it can maintain its own in-house SEM firm yet not be open to accusations of favoritism or conflict. I’d fully expect to see Performics get sold off.

Postscript by Barry: Here are more documents from the SEC. First the Official 8-K, then the Full Text of agreement and merger plan and finally the news release.

Miguel Helft at the New York Times has a relatively long and interesting article, with some interesting details, that rounds up the status and mixed results (so far) of Google’s moves into radio, TV and print newspapers. From my understanding, the print newspaper ads have been the most successful to date.