MATCHING ADS TO BUYERSBut it aims to do more than simply help BMW, say, plaster brand ads on car videos or car sites. The fastest-growing kind of display ads, called performance ads, work more like search. They allow advertisers to use data analysis and user-tracking technologies to match ads more closely to likely buyers and measure mouse clicks and other actions so advertisers pay only when ads deliver. Google spies an opportunity to apply its mathematical wizardry to make those ads even more effective. The idea is to make display ads useful knowledge instead of visual clutter. "It's like search—matching people with information they want," says Sergey Brin, Google's co-founder and president of technology. "It just happens to be promotional." This summer, Google will begin demonstrating what may be its most potent weapon in this emerging battle: an overhauled version of the advertising exchange that it picked up in the $3.2 billion acquisition of DoubleClick last year. Ad exchanges are sort of like stock exchanges for online ads. Web sites put ad space up for auction, and ad agencies, armed with demographic and behavioral data about the people who visit those sites, bid to place ads for their clients' campaigns. Yahoo, Microsoft, and others also run exchanges. Until now, Google's and DoubleClick's ad-placement systems used different software, so ad agencies had to cobble together programs to place, monitor, and measure ads. In the revamped exchange, they'll be able to use the two systems seamlessly, making ad buys simpler. At the same time, Google is pushing Web publishers, which have been wary of putting prime ad space on the exchange for fear of turning it into a low-value commodity, to pony up more space. In return, Google is expected to give Web publishers more control over pricing and who can bid on the space. Google will also help advertisers and agencies buy ads more easily and quickly: When ad space with price and audience demographics matches those advertisers set for a particular ad, the spot runs instantly. "The exchange will allow Google to make a go of it in display," says Michael Hayes, executive vice-president and managing director of digital for ad agency Initiative. "It really turns the business model on its head." The exchange is part of Google's overriding goal to make display ads, which can be expensive to create and complex to manage, so easy that even the smallest businesses can use them. "Google's vision is to grow the pie for everybody," says Neal Mohan, Google's director of display products. For instance, Google introduced a free Display Ad Builder last fall that lets anyone use simple building blocks to create an ad. Some 80% of those using it had never bought a display ad before. Marc Loge, who handles online ads for the Wilshire Grand Hotel in Los Angeles, had run search ads exclusively and didn't want to bother with display. But at Google's urging he quickly created a bare-bones ad and ran it on Google's Web sites. "We've gotten great returns—even better than search," says Loge.
DEPARTING AD EXECSAt the same time, Google wants to bring onto the exchange more large Web sites, which control the bulk of display-ad revenues. DoubleClick's relationships with the biggest Web publishers may give it a leg up. "Google is very central to our strategy," says Curt Hecht, president of the tech development unit at VivaKi, ad agency Publicis Groupe's media and online operation. Still, the exchange won't be an instant game-changer. Since exchanges require a new mindset at agencies and publishers, they may take time to catch on widely, says Mike Walrath, founder of Yahoo's Right Media exchange. And some think anything but search gets short shrift inside Google. "Display is still the redheaded stepchild of their ad initiatives," says Rob Leathern, CEO at CPM Advisors, which helps advertisers improve their online campaigns. Insiders say that's partly why Google has seen a stream of departures of ad executives in the past two months who see more opportunities elsewhere. Most recently, David Rosenblatt, president of Google's display-ad efforts and former DoubleClick CEO, left in May. But Brin insists Google is serious. "Display is going to be a large business for us," he says. "It's not just an experiment."
Business Exchange: Read, save, and add content on BW's new Web 2.0 topic networkBrave New Advertising
Combine the technological intricacies of the Internet with the black art of marketing, and it's no surprise that online advertising is a complex stew few outsiders can master. In particular, the rise of middlemen such as ad networks and ad exchanges has transformed the online landscape. In its recent Ad Network & Exchange Guide, Advertising Age examines how they use sophisticated targeting and measurement technologies to make ads more relevant—and lucrative.
For the full guide, go to bx.businessweek.com/google/reference