One of the reasons for their low adoption rates could be the complexity involved with display advertising. Display ads are available in several formats, such as images, videos and interactive gadgets. It can be a laborious task to manage the organisation of such varied ads across thousands of Google Content Network sites. Hence, advertisers have not been too keen on this form of advertising.

Publishers on the other hand, are left with a lot of unused ad space on their sites.

To help simplify this process for both the parties involved, Google has now launched the new DoubleClick Ad Exchange. This ad exchange will be a platform from which publishers can sell and advertisers can buy the required ad space via their existing Google AdSense and Google AdWords accounts.

The exchange will function as a real-time automated auction market. Advertisers will try to get better ad space, while publishers will try to extract better rates from the advertisers and also sell more of their available ad space.

The exchange will also allow advertisers to measure the performance of their ads, thus offering a degree of accountability. It will also make display advertising more accessible to all advertisers.

In 2008, the total revenue generated from online advertising was $23.4 billion, while display advertising accounted for only $7.6 billion of that total. Hopefully, the new, better integrated Google AdWords / DoubleClick Ad Exchange will help to increase the revenue generated by display ads.

So far, Yahoo! remains the market leader for display ads ever since they bought RightMedia in 2007 for $680 million. Google, no doubt, hopes to be able to now overtake Yahoo!

Introduction to the new, open Google Ad Exchange

Google, the parent company of DoubleClick, also announced that they have reached an agreement with DoubleClick, to launch Silverlight 2 based ads.

DoubleClick already has ad deals with Flash, RealMedia, and Windows Media, so it seems like a good idea for Google to also add Silverlight to their portfolio. Google and DoubleClick will begin this new partnership by monetising 2,500 hours of Silverlight’s NBC Olympics content. NBC Olympics.com will be among the first to offer Silverlight 2 to their advertisers with DoubleClick In-Stream ads.

“Microsoft has always had a strong commitment to working closely with partners and the industry to enable them to leverage our tools and platform to deliver great user experiences. With Silverlight, we’ve extended that commitment to the advertising space,” said Scott Guthrie, Corporate Vice President, .NET Developer Division.

What hasn’t been clarified is why Microsoft had to turn to its biggest rival, Google, to sell ads on their own platform, rather than using Microsoft’s own adCenter advertising!

This announcement will be good news for mobile publishers. It will eventually improve their income through automated access to various networks, thus helping to fill available inventory. The earlier practice often tied down publishers to a single network. Now they are in a position to choose whichever network offers them the best deal.

Ari Paparo, DoubleClick’s product manager says, “This integration is a great example of how DoubleClick is working with key industry players, to bring value to publishers by enhancing the liquidity of mobile display inventory. Publishers who have a tie up with DoubleClick Mobile will be able to sell mobile inventory indirectly through any of the above networks.

DoubleClick Mobile will provide details about what inventory has sold directly, what has been taken up by the ad networks and what is still available for sale. Publishers will have better income earning potential through direct and indirect sale of ads.

Paul Palmieri, President and CEO of Millenial Media, believes that the tie up with DoubleClick Mobile will allow publishers to accept ads from their own roster of leading advertisers without limiting their right to direct sales, thereby bringing more publishers into mobile advertising. Although DoubleClick is a part of Google, they have decided to remain neutral (for now) in order to benefit their publishers.

With the number of mobile Internet users increasing, publishers are naturally expected to try and use this opportunity to the best possible extent to maximise both direct and indirect sales.

DoubleClick consists of two parts, an affiliate marketing company and Performics, which provides search engine advertising and search engine optimisation services. These SEO services would concentrate on improving a website’s ranking on Google, which would create a conflict of interest for the search engine.

Google has thus concluded that it would be best to divide the DoubleClick business into 2 parts – affiliate marketing and search marketing. From an objective point of view, they feel it would be best not to get involved in the search engine marketing business and will be selling the Performics search marketing business to another company to avoid any clash of interest.

Read Google’s official announcement about selling Performics

The strategists at Google believe that this way the search provider would be able to remain objective in their search and advertising divisions, which are the mainstay of the company and will help users to retain their faith in the company, thereby letting search operations grow further.

So far Google has received interest from several parties but nothing has been finalized yet, and until that happens the Performics search marketing group will continue to function as a separate division in DoubleClick. The affiliate marketing division will soon be integrated into Google’s own operations thus providing more value-added services to their advertisers and publishers through additional tools and monetization opportunities.

Due to these plans, about 25% of DoubleClick’s workforce in the U.S.A may be laid off or will be offered a transitional job. The implications of these plans for employees in Europe will be finalised in consultation with the employees wherever possible.

The deal was cleared after almost one year of negotiations. Google shares rose by 6 percent or $26 on the day, stopping a continued slide that would have landed the stock at below $400 had it not been for the announcement from the EU.

Layoffs at DoubleClick in the U.S. and elsewhere are very likely after a process of job matching. The reductions will initially be carried out in the U.S. by April and elsewhere thereafter. According to CEO Eric Schmidt, “As with most mergers, there may be reductions in headcount. We expect these to take place in the U.S. and possibly in other regions as well.”

Performics, the search engine marketing part of DoubleClick should be spun off, since owning a search engine optimisation agency would present a direct conflict of interest. However, Google refuses to confirm that this will happen, especially since the EU legislators have not placed any conditions on the merger.

Sales and account management functions are likely to face the most reduction in workforce when the two companies align forces.
Google will now have access to one of the leading display advertising platforms. In additiona to the obvious use of Doubleclick’s inventory to offer even more ad space to Google AdWords advertisers, they will also use DoubleClick’s technology to improve effectiveness and measurement of performance of digital media for advertisers and publishers.

Engineers at Google report that some DoubleClick tags will also soon be allowed in Google AdWords, enabling better performance tracking for advertisers already using the platform for display advertising.

Announcements about the Google – DoubleClick merger nicely match the timing of the launch of Google’s Ad Manager tool, which according to Google Senior Project Manager Rohit Dhawan is “a free, hosted ad and inventory management tool that can help publishers sell, schedule, deliver and measure their directly-sold and network-based ad inventory.”

The EU Commission has set itself a 140-day deadline. The investigation should be completed by 2 April 2008. This is the first major setback Google has ever faced in its nine year history. This news will likely keep Google’s stock below the $700 mark it had crossed last week.

Eric Schmidt, CEO of Google, said in a statement, “We are obviously disappointed.” Assuring investors and the press that the company would work with the commission, he added, “We seek to avoid further delays that might put us at a disadvantage in competing fully against Microsoft, Yahoo, AOL and others whose acquisitions in the highly competitive online advertising market have already been approved.”

If EU regulators rule against Google, it could influence the US Federal Trade Commission’s ruling as well. Either way, this delay could actually damage Google’s chances of competing with Microsoft and Yahoo! in the online display advertising market.

Microsoft officially entered the market in May with the aQuantive, a month after Google bought DoubleClick. Microsoft’s acquisition passed regulatory approval in August whereas the Google-DoubleClick deal ran into trouble, first inviting scrutiny from the FTC and then the EU Commission.

Similarly, Yahoo! acquired Right Media and Blue Lithium to keep up with Google and Microsoft. Their deals have also managed to avoid scrutiny. This isn’t surprising, though, considering Google controls more than 80% of the paid search advertising market, whereas both Yahoo! and Microsoft have less than 10% market share in Europe.

While Google wades through legal loopholes, Microsoft could potentially build up a strong offering and establish a lead that could make things difficult for Google / DoubleClick in the future. Whether they can actually pull it off and make good use of the time “gifted” to them by the EU Commission remains to be seen.