Google Launches DoubleClick Ad Exchange

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The ad exchange won't have much impact on Google's revenues any time soon, since Google takes only a tiny cut of ad revenues from the exchange. Moreover, both publishers and advertisers remain cautious about exchanges because they represent an entirely new way to buy ads. Right Media, the ad exchange Yahoo bought several years ago, is currently the leader, but even its founder, Mike Walrath, has said exchanges will take time to catch on widely.

Google's own display efforts have proceeded more slowly than the company had hoped. Insiders say that's largely because much of the DoubleClick software needed to be rewritten to work with Google's ad software and computing infrastructure. At the same time, Google's display operation has seen some high-profile departures. Former DoubleClick CEO David Rosenblatt left in April, reportedly to start his own venture. Last week, Michael Rubenstein, former director in charge of recruiting ad networks for the DoubleClick exchange, left to become president of advertising technology provider AppNexus.

Still, running an exchange puts Google front and center in another huge ad market beyond its mainstay search ads. With the launch of the new DoubleClick ad exchange, which includes a number of new features, Google hopes its display business will start to accelerate.

Real-Time, Last-Second Bidding

Google says the exchange will allow real-time bidding for advertising inventory through the use of automated software tools. A publisher may sell space its direct-sales team couldn't sell to an ad network that offers $5 per thousand impressions, or viewings by visitors, known as CPMs. But another ad network could step in—even at the last second, using automated bidding technologies—and offer $10 because it believes it can deliver more potential customers to its advertiser or agency client. Then Google's exchange can instantly run the more lucrative ad instead.

The draw for advertisers is that they can automate their placements to get in front of the most lucrative potential customers. A regional retailer might offer to pay $5 CPMs for a product ad to run on certain Web pages but specify that it's willing to pay $10 if the publisher can show that ad to people in a particular geographic area in which it wants to sell a product.

The new exchange also lets advertisers and publishers that currently use Google's search-ad systems participate in the exchange using the same software. Google isn't naming specific publishers that are participating in the exchange, though early participants say large sites such as WashingtonPost.com (WPO) and other major newspapers and entertainment sites are among them. It's not certain how much ad space publishers will make available on the exchange. Publishers will have control over which agencies and ad networks can bid on their space and what kinds of ads they can run.

Early trial users say the exchange looks promising. Kevin Lee, CEO of search marketing firm Didit, says so far it appears to be "a step above [Yahoo's] Right Media. We're fairly pleased with it" because the DoubleClick exchange includes inventory from well-known sites, he told BusinessWeek earlier this year. "We like the concept of an ad exchange that gives access to these kinds of sites, and we're willing to pay more for that."

Hof is BusinessWeek's Silicon Valley bureau chief.

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