With a new display ad exchange developed by its DoubleClick subsidiary, Google is hoping to give its one-trick pony another act.
Google has turned into one of the Internet's largest and most influential companies on the popularity of its search engine and the profitable text ads it sells alongside those search results. This business generates the vast majority of its revenue and profits and gives Google the resources to tackle a variety of other projects from Google Apps to Chrome OS to Google Books.
But like just about anything, that business can only grow so fast. Google will need another profitable, growing business to maintain its spot atop the Internet world, hence the motivation for its $3.1 billion purchase of DoubleClick a year ago and the launch of the DoubleClick Ad Exchange Friday.
The DoubleClick Ad Exchange is sort of like a stock exchange, where buyers and sellers meet to haggle over prices for display ads, such as banner ads or video ads. Companies that sign up to participate in the exchange can search for open spaces in which to place their ads and bid on that space just like Google's text-ad auction system for search keywords. It will also plug into Google's existing infrastructure for AdWords--ads sold on Google search results pages--as well as AdSense--ads hosted by Google but displayed on third-party Web sites, giving those customers another option for their marketing campaigns.
The DoubleClick Ad Exchange is based on the marriage of DoubleClick's ad exchange and Google's text-ad auction process.
(Credit: Screenshot by Tom Krazit/CNET)Internet display advertising--banner ads, video ads, and the like--has a been a bit frustrating for advertisers and publishers to date. Advertisers spent $10.5 billion on search ads last year, up 20 percent from 2007, according to the Interactive Advertising Bureau. They spent $7.6 billion on display ads in 2008, up just 8 percent from the previous year.
Unlike simple text ads, display ads are more complex and time-consuming to develop, and haven't yet produced the same level of returns for advertisers that text ads have garnered. At the same time, the amount of advertising inventory on the Internet has exploded with the growth of news and entertainment on the Web, leaving tons of space for advertisers to flock their wares and the requisite supply and demand issues for publishers.
Yet even in the depths of a horrific advertising recession, few companies are willing to give up on Internet display ads altogether. They offer the chance to present a much more sophisticated brand image than a "Cool shoes found here!" text ad on Google or other search engines, and when not obnoxious can be creative and even entertaining.
Google is hoping that its auction-based format can entice more ad buyers into the display market by matching them more appropriately with publishers looking to offload their ad inventory. "We believe that a better system built on better technology can help grow the display advertising pie and benefit everyone," Google said in a blog post announcing the DoubleClick Ad Exchange.
As has been the case for years, Yahoo is squarely in Google's sights with this launch. Yahoo owns the display ad market at the moment following its purchase of Right Media in 2007, and with its decision to exit the search business plans to rely increasingly on display ads to fund its Web site in the coming years.
"While Right Media is the largest ad exchange and platform solution, we fully expect the display market to be fragmented and for there to be other exchanges. We welcome these exchanges, and look forward to working with them and integrating with them for our partners," Yahoo's Frank Weishaupt, vice president of North American marketplaces, said in a statement on Google's launch.
Google's edge could be the marriage of the AdWords and AdSense networks with the Display Ad Exchange. Under its deal with Microsoft Yahoo retains the right to sell search ads on search result pages powered by Bing, meaning it can also offer advertisers a combination of outlets for their messages. But advertisers looking for a search ad partner tend to think Google first, and that's not going to change unless Bing makes serious market share gains against Google over the coming year.
Some are skeptical that Google is going to make a large dent in this market right away. BernsteinResearch's Jeff Lindsey put out a research note spotted by Paid Content predicting that the exchange doubles DoubleClick's revenue to around $500 million next year, but that's still a pittance compared to Google's $21.8 billion in 2008 annual revenue.
But it's a chance for Google to see if the auction model developed for text ads will work in the more complicated display ad market, and could provide a foundation for future growth.
A sampling of Yahoo's new display ad templates.
(Credit: Screenshot by Tom Krazit/CNET)Yahoo is hoping to make it easier for small companies enamored with search advertising to consider display ads.
The company rolled out Yahoo My Display Ads Monday, which it described as "self-serve display ads" for advertisers that can't necessarily justify a creative department or consulting firm to design display ads for their business. The program, which Yahoo is calling a "pilot," only requires those companies to spend $30 a day and lets them pick display ad templates from over 700 models.
For the most part, small businesses with limited budgets tend to like search advertising, which lets them pick keywords specific to their business and spend relatively small amounts of money only when searchers click on their ad. The problem for Yahoo is that those businesses tend to spend that money with Google, which enjoys around 70 percent of the revenue spent on search advertising.
Yahoo hopes to convince those companies to spread the wealth around a bit more by pointing out that display ads can have benefits beyond clicks, such as brand building. It has been trying to convince advertisers that a mix of search and display ads is the best way to get your message across for quite some time.
Advertisers who participate in this program will be able to pay Yahoo per click or per impression, meaning the estimated number of times that ad is viewed.
A collection of nearly two dozen online publishers plan to offer advertisers at least one of three new display advertising formats beginning in July, the Online Publishers Association announced Tuesday.
The ad units are designed to be larger than banner ads, offer interactivity, and comprise a greater proportion of the advertising-to-editorial ratio that most publications operate under.
The move by online publishers comes at a time when the economy is in a recession and advertisers are pulling back on their spending.
"Agencies are looking for new ways to integrate their clients' brand experiences with more interactivity on the page, and these new units provide a way for them to accomplish this," said Pam Horan, association president, said in a statement.
The nearly two dozen online publishers represent approximately 66 percent of the U.S. Internet audience, according to the association. And they include FOXNews, NBC Universal, CBS Interactive (publisher of CNET News), ESPN, Time Inc., and The Wall Street Journal Digital Network.
The three advertising units include:
A pushdown ad that runs the width of a page but retracts to the top of the page, as well as offering a second ad on the right hand column.
(Credit:
Online Publishers Association)
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(Credit:
Online Publishers Association)
A second ad unit, XXL Box, will feature page-turn functionality, as well as the ability to run video ads on the 468 wide x 648 tall size panel.
The fixed panel ad, 336 wide x 860 tall, remains stationary and users scroll up and down to view the ad.
MySpace Chief Executive Chris DeWolfe said that he's "cautiously optimistic" about ad revenue for the News Corp.-owned social network in the face of a recession, Reuters reported Monday.
Speaking at the outlet's Reuters Media Summit, DeWolfe said that MySpace's "revenue and profits are significant and they continue to grow in spite of the poor economy." Fox Interactive Media, the News Corp. division that encompasses MySpace, Photobucket, and other digital properties, was declared the top destination for display ads on the Web several months ago.
But display ads will be hit hard as ad budgets are cut, many critics have said--harder than other forms of digital advertising like search ads. Market research firm eMarketer slashed its 2009 projections by over $1 billion this week.
DeWolfe also said, according to Reuters, that MySpace's revenue in the last quarter was up 18 percent from the previous year's. He's expecting that they'll continue to grow--just not as much.
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