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Now that Google has acquired DoubleClick--the display advertising feather in its proverbial cap--it's time to see if the hat fits.

The $3.1 billion acquisition, which finally closed last week upon European regulator approval, gives Google a much needed boost in the market for display advertising.

Google hasn't offered many clues as to what its plans are with DoubleClick, other than to hint at layoffs. But Google pundits and executives at small ad outfits do have concerns and plenty of opinions about what the search king should do.

Google's AdSense serves up pay-per-click text ads to Web sites within its publisher network, while DoubleClick, which markets a product called Dart, places banner ads on Web sites. DoubleClick also runs an advertising exchange and a search-engine marketing business called Performics.

There are some basic conflict-of-interest questions with some of the additions to Google. As the largest search engine, Google has kept its distance from search engine optimization, or SEO, which is the science of increasing a Web page's rankings in search results. But with Performics, Google owns an SEO company.

"Even if Performics is kept completely separate from the Google search team, there's the impression that Performics might have some special 'in' with Google's non-paid search results," writes Danny Sullivan in a Search Engine Land blog post in which he urges Google to get rid of Performics.

Granted, Microsoft finds itself in the same SEO-owning boat after acquiring Avenue A/Razorfish and Sullivan poses this question to both companies: "You own the pie; do you really need to sell the pie cutters too?"

There's another conflict Google bumps up against with DoubleClick--the fact that it risks alienating publishers who don't want Google to have too much control. Google could integrate DoubleClick's Dart ad management and serving technology into AdWords to offer one unified dashboard and see into even more Web sites across the Internet.

"A lot of DoubleClick's customers consider Google a competitor," says Frank Addante, chief executive of The Rubicon Project, which offers a dashboard for sites to manage the more than 300 online ad networks. (Addante was formerly with L90/adMonitor advertising platform, which was bought by DoubleClick in 2001.)

"Now, if Google owns all the technology they have access to that data, they know what's being bought and sold," Addante says. "It puts customers in a tough situation."

The merger "cements Google's position as 'frienemy' with major publishers," says Jim Barnett, chief executive of Turn, an automated online ad market.

And there's the question of whether Google will continue to restrict its customers from working with third-party ad servers. "Advertisers working with Google couldn't use third-party ad serving, so a lot of people wouldn't use Google," says Michael Cassidy, chief executive of online ad network Undertone Networks.

"Our clients on DoubleClick that have contracts expiring with DoubleClick are saying it's a dead end," that it will be eclipsed by Google technology, which will impact customers, said Ruben Buell, chief executive of AdShuffle, an ad serving company.

Google also has to figure out what the best business model is for ad serving. DoubleClick charges customers for it, but Google is testing a free ad management service called Ad Manager.

Beyond the technical integration issues, the two merged companies face a culture clash. It's "Madison Avenue hipsters" meets "Silicon Valley geek types," according to Addante.

"Display is more brand advertising, more emotional," he says. "I think it's going to take Google some time to learn that side of the business because they're so data driven."

A New York lawmaker wants you to have the choice over whether Internet companies can serve up ads based on your actions online and who you are.

Companies like Microsoft and Yahoo are already serving ads that reflect your interests, such as Web sites you visit, and even your geography. Behaviorally targeted advertising is the vanguard of online marketing because it can lead to more sales than random ads can.

Privacy advocates say that Web surfers don't understand how much they are being tracked online, and that if they did they wouldn't like it.

With this in mind, Democratic Assemblyman Richard Brodsky has sponsored a bill that would require consumers' consent before Internet companies could use personal information about them for advertising, according to The New York Times.

Further north, a bill was introduced in Connecticut that deals with data collection by ad networks, which serve the ads on other companies' sites, the article says.

The Interactive Advertising Bureau has proposed voluntary guidelines that would have consumers opt-out of information gathering for advertising purposes. The Federal Trade Commission guidelines go further and say behavioral advertising should be opt-in for consumers.

Given all the concerns U.S. lawmakers and others had about privacy issues with Google's acquisition of DoubleClick, it's likely the matter won't be going away anytime soon.

Yahoo is using rosy financial projections to bolster its case with shareholders in a "last-ditch attempt" to get Microsoft to up the ante in its bid for the company, analysts say.

Yahoo executives began a series of meetings on Tuesday with the company's largest institutional investors and showed them a presentation detailing the company's three-year financial projections that illustrates "the broader picture of all the assets," says a source familiar with the matter.

Under Regulation Fair Disclosure, Yahoo is required to disclose material information to all investors at the same time, so it filed the information with the U.S. Securities and Exchange Commission to make it public.

Yahoo representatives declined to comment.

To Wall Street, the motivation was clearly to send a message to Microsoft.

"The company is clearly laying out a very optimistic scenario," Ross Sandler, an analyst at RBC Capital Markets, wrote in a research note. "Judging by recent history, we remain skeptical of Yahoo's ability to execute smoothly against this plan. If the overall economy and the online advertising space were in a healthier place right now, we would have more confidence. At the very least, this is a smart last-ditch effort by Yahoo management to squeeze a few more dollars out of Microsoft."

The strategy is likely to work, Sandler predicted. "We believe that the Microsoft/Yahoo deal ultimately goes through, and that today's argument could push Microsoft to sweeten its bid to avoid a hostile takeover which may alienate Yahoo employees," he wrote.

"This is another step in the public negotiation between these two companies," Clay Moran of Stanford Group Company wrote in a research note. "We believe this deal is turning friendly. But, Yahoo's alternatives are dwindling."

Mark Mahaney of Citi Investment Research also predicted that Microsoft will boost its offer. "Buying Yahoo may be Microsoft's ONLY game-changing option in (the) Internet sector," he wrote.

In the presentation, Yahoo reaffirms its first-quarter and full-year guidance of $1.28 billion to $1.38 billion and $5.35 billion to $5.95 billion, respectively. The company also expects to double operating cash over the next three years and projects 24 percent growth in search ads and 19 percent in display ads each year, Sandler notes.

The growth estimates assume that Yahoo will see significant revenue increase from search, market share gains in display, and acceleration of international growth, he adds.

That could all be a leap of faith, particularly in light of predictions for slower online ad sales growth because of softness in the overall economy.

A snag in the Microsoft-Yahoo negotiations could be coming in Asia--The Wall Street Journal is reporting that Alibaba Group, the Chinese Internet company that Yahoo owns nearly 40 percent of, is talking to investors about buying Yahoo's stake so it could stay independent if Microsoft acquires Yahoo. "For Microsoft, gaining Yahoo's Asia stakes was a key attraction when it made the bid Jan. 31, an offer now valued at about $42 billion," the report says.

Research firm eMarketer has lowered its forecast for online ad spending due to the "foundering" economy and problems social networks are having attracting ad dollars.

The firm now projects that 2008 online ad spending in the U.S. will be $25.8 billion, down slightly from the $27.5 billion it had forecast for 2008 in October.

The growth rate for online ads, which was nearly 35 percent in 2006 and 25 percent last year, is expected to be 23 percent this year, then drop to around 16 percent or 17 percent for a few years until rising to 24 percent in 2012, when online video advertising is expected to boom amid a larger economic recovery, the report says.

The report, titled "U.S. Online Advertising Spending: Resilience in a Dicey Economy," will be released later this week. It reflects 2007 online advertising figures from the major portals, which receive 57 percent of the total spending in the U.S., according to eMarketer senior analyst David Hallerman.

"Over the next few years, (there are) indications of continued economic problems," he said. "Paid search will be hurt as consumers shop less."

In addition, popular sites on the Internet have had difficulty monetizing their traffic; "for example, the most popular sites in social networking where the amount of traffic and the amount of ad dollars don't match up. Maybe they won't," Hallerman said.

"While a foundering economy will certainly affect online ad spending, accounting for the revised estimate, the Internet will support continued ad spending growth even as other media may falter," an eMarketer statement says.

Still, there are positive growth rates for online ads and "far more" than any other media because advertisers will want to spend money on more measurable marketing, Hallerman says.

(Credit: eMarketer)

If you're among the majority of Americans, you probably aren't watching high-definition on your television yet. But come Monday, you may start to see HD commercials on your PC.

San Francisco-based BrightRoll is offering advertisers the ability to run large-format, high-quality video ads across its network of Web site publishers.

The ads initially appear as banner ads on the page. When a user click on one, a large separate window opens up on top of the Web page.

There are trade-offs for serving up high-definition video in terms of time it takes for them to load, but these ads seem to load pretty fast, according to Bobby Tulsiani, a consumer video analyst at Jupiter Research.

"The critical thing is that it doesn't get in the way of the user experience," he says. "For advertisers, the higher quality matters for the brand recognition, especially ads showing off a car, or travel ads in which the scenery is important."

eBay was set to announce on Monday that it is bringing its affiliate marketing program in-house instead of outsourcing it to ValueClick.

(Credit: eBay)

Scheduled to launch April 1, the new eBay Partner Network will give eBay a direct relationship with the more than 100,000 Web sites that drive traffic to eBay through ads and links. As a result, eBay will have better insight into what ad campaigns boost traffic.

Up until now, the affiliate marketing programs for eBay and Half.com were managed by ValueClick's Commission Junction platform.

However, eBay's Tradera AB, ProStores, Reseller Marketplace, Media Marketplace, eBay Stores, and StubHub will continue working with Commission Junction, and eBay affiliates working with Affilinet, Tradedoubler, and other platforms will not be affected. eBay also will continue working with ValueClick's Mediaplex division for ad serving, tracking, and custom projects.

A basic rule of thumb in traditional journalism is to keep content separate from advertising. But a new type of online ad is intentionally blurring the lines to get more people to click on the links.

Online ad company Kontera on Monday is set to launch a type of in-text ad that places ads side-by-side with related content.

The Kontera Hybrid, which really sounds to me like the name of a car, features ads hidden behind highlighted words on a Web page. When the word is moused over, the ad and related content are displayed in a separate window.

For example, a blog about autos could display Audi ads whenever highlighted "Audi" words are moused over. The ad window that pops up could have articles, photos, and videos related to the Audi that appear on one side of the window opposite the ad. The Web site publisher selects what related content to display in the window and can show ads from its own advertisers, from Kontera's network of advertisers, or both.

The hybrid ads will be debuting on the sites of Men's Fitness, Star, and National Enquirer.

In testing, the ads were shown to get three times as many people clicking on them than Kontera's traditional in-text ads that don't have links to related content, Kontera said.

New Kontera Hybrid ads mix in-text ads with related content that appears next to the ad.

(Credit: Kontera)

Updated 9:25 a.m. PDT Thursday with more details from Google blog.

Google is testing a new service called Ad Manager that will give Web publishers more control over ads that appear on their site.

Google Ad Manager is a "free, hosted ad and inventory management tool that can help publishers sell, schedule, deliver and measure their ad inventory," according to a Google blog.

Publishers participating in the beta test launched on Thursday can sell their own ad space, run ads from other online ad networks, or carry Google ads. The ads can include text, display, or video ads.

Typically, ad-serving companies, like DoubleClick,--now owned by Google--charge to serve up the ads. Google got final approval for its $3.1 billion acquisition of DoubleClick earlier this week.

Ad Manager is targeted at companies with small sales teams and it complements DoubleClick's ad-serving product, which is aimed at larger sites, Google said.

A Google spokesman told The Wall Street Journal, which first reported on Ad Manager late Wednesday, that there are no immediate plans to make DoubleClick products free, despite speculation that it will.

Online ad network Specific Media has acquired U.K.-based display ad network Adviva. Terms of the deal were not disclosed.

The purchase marks Specific Media's move into the European market. Specific media offers demographic, behavioral, contextual, and geographic ad targeting and has anonymous data on 365 million consumers globally.

Other companies are making acquisitions to push into the U.S. market, including U.K.-based Adconian, which announced last week it is acquiring Las Vegas-based Frontline Direct.

There is a huge amount of merger and acquisition activity in the hot online advertising space. These are tiny compared with Microsoft's $6 billion purchase of Aquantive and Google's $3.1 billion acquisition of DoubleClick, which finally cleared the final regulatory hurdle, in Europe, on Tuesday.

(Credit: Adviva)

(Credit: Specific Media)