Google Buys Teracent to Boost Display Ad Push

Posted by: Rob Hof on November 23, 2009

If anyone doubted Google was serious about online display advertising, those doubts surely were quashed today. This morning, Google announced the acquisition of Teracent, a startup that helps advertisers format and more precisely target display ads to particular groups of people. In real time, Teracent can reformat ads based on geography, language, and other factors, so a single ad can be customized with thousands of variations.

Teracent, whose staff includes former executives of Yahoo and Google’s DoubleClick, was widely seen as a likely acquisition by Google. Indeed, I talked with Teracent executives months ago and asked if an acquisition by Google was a possibility. Of course, their stock answer was that they’re trying to build a company, yada yada, but they also made it clear that a takeout by Google was a distinct possibility. The company has raised about $5.8 million mainly from New Enterprise Associates.

The acquisition, small enough that Google isn’t required to disclose its terms, is the latest in a series of moves the search advertising giant has made to become a power in display ads, the pictorial banners that support most Web sites. On Nov. 9, it announced plans to acquire mobile display ad firm AdMob for $750 million in stock. And in September, Google relaunched a long-awaited advertising exchange that grew out of its $3.2 billion purchase last year of the display ad firm DoubleClick.

Teracent probably won’t be the last acquisition to bolster Google’s display efforts. The moves come at a time when display ad leader Yahoo is struggling to right itself—and at a time when the recession has dealt display ads a heavy blow. Although Google recently has seen its search ad business improve after a slowdown for much of this year, display ads are seen as the next potential growth area for the company.

Here’s the blog post from Neal Mohan, Google’s vice president of product management, and engineering director Joerg Heilig:

Can you spot the difference between these two sample display ads? Of course you can. However, the most important difference is not discernible to the naked eye.

The lower ad was customized and chosen from thousands of different creative elements, automatically and in real-time, by machine-learning algorithms developed by Teracent, a San Mateo, California startup.

We think that this technology has great potential to improve display advertising on the web. That's why we're pleased to announce today that we've entered into a definitive agreement to acquire Teracent. The transaction, which is subject to various closing conditions, is expected to close this quarter.

As you know, we've been busy releasing new features and products to help improve display advertising on the web for everyone. We believe that Teracent's technology fits neatly into these efforts.

Teracent's technology can pick and choose from literally thousands of creative elements of a display ad in real-time — tweaking images, products, messages or colors. These elements can be optimized depending on factors like geographic location, language, the content of the website, the time of day or the past performance of different ads.

This technology can help advertisers get better results from their display ad campaigns. In turn, this enables publishers to make more money from their ad space and delivers web users better ads and more ad-funded web content.

We're looking forward to welcoming the Teracent team to Google and to making this technology available to our display advertising clients — including those who run display ad campaigns on the Google Content Network and our DoubleClick clients.