Posted by Alex Kinnier, Group Product
Manager
In April we
href="http://www.google.com/intl/en/press/pressrel/doubleclick.html"
>announced that we're buying DoubleClick,
a leading company in the ad serving business. When we made this
announcement, we gave some of our reasons. But because online
advertising is complicated, I thought I'd step back a bit and
offer some more context. If you're an expert, please bear with
me, as some of what follows will seem elementary to those already
familiar with the online advertising world. If you're not, I
hope this gives you a better understanding of how advertisers,
publishers, ad serving companies, agencies and other companies such
as Google all fit into this exciting new mix.
A little history
In the earliest years, online ads were simple banner ads on
websites. Advertisers would purchase these banner ads for those
sites their customers would likely visit. A tire company, for
example, would place banner ads on sites for automobile
enthusiasts.
An innovation followed: Text-based ads targeted at search. Type
“drip irrigation” into a search engine and up pop ads, or
“sponsored links,” to gardening service and supply companies. This
development made online advertising accessible to small advertisers
for the first time. According to a May 2007 IAB (Interactive
Advertising Bureau) study called the "
href="http://www.iab.net/resources/adrevenue/pdf/IAB_PwC_2006_Final.pdf" >
Internet Advertising Revenue Report
," text-based search
ads now account for 40 percent of online ads. Google, Yahoo! and
MSN are the leaders in managing this category of text-based ads.The
same IAB study notes that display ads account for roughly another
40 percent of online ad sales. Unlike text ads, these may
incorporate 3-D graphics, full-motion video, sound and user
interactivity. And the remaining 20 percent consists of other
categories such as email, classified and lead-generation ads.
Three portals – AOL, Yahoo! and MSN – lead the industry in display
ads. Each has more than $1 billion in annual display ad revenue.
Content sites such as CNET and ESPN.com are also in the game.
Google, however, has been a minor player in display
advertising.
Meanwhile, ad serving companies such as DoubleClick, Atlas, and
MediaPlex have been helping advertisers get their ads onto these
sites and measure how effective the ads are. Since Google has never
played in this space, acquiring DoubleClick will enable us to
complement our search and content-based advertising capabilities.
Its products and technologies will help to improve online
advertising for consumers, advertisers and publishers.
By enabling our AdSense network to work with DoubleClick’s delivery
mechanisms, for example, advertisers can obtain more precise
metrics in order to judge the effectiveness of their campaigns. The
combination of the technologies and expertise of Google and
DoubleClick will help publishers better monetize their unsold
inventory, thus helping to fuel the creation of even more rich and
diverse content on the Internet.
What ad serving is
As you might expect, ad serving is the act of serving, or
delivering, ads to websites. Google and DoubleClick play different
but complementary roles in online advertising. Google primarily
sells ads, and DoubleClick delivers (serves) ads. The relationship
between Google and DoubleClick is analogous to the relationship
between Amazon.com and Federal Express. Amazon.com makes money by
selling a book to the consumer. Federal Express makes money by
delivering it to the consumer.
For some perspective on the relative size of the ad serving
business versus the online ad sales business, some industry
estimates put the latter, globally, at about $20-30 billion.
According to various
href="http://www.emarketer.com/" >eMarketer studies (available
by subscription), estimates of ad serving, on the other hand, are
many times smaller — probably 20 times smaller, or even
less.
How ad serving works
There are two types of ad-serving products: publisher and
advertiser-agency. Publishers use ad-serving products to manage how
and when the ads they have sold appear in their websites. For
example, will the ad appear on the front page of the site, or on a
subsequent page? The process of placing the ad on the appropriate
page and in the appropriate size is managed by the publisher’s ad
server.
In addition to placing ads in the right location at the right time,
ad servers report on the performance of the ads. This is an
absolutely vital function. Real-time performance reporting enables
advertisers and agencies to change the content, and timing of ads
almost on the fly. The value to the advertiser-agency of an
ad-serving company such as DoubleClick is having a single place to
measure and report on all online campaigns for ads that run on
different sites across the web.
How Google and DoubleClick differ
Google makes money primarily by selling text-based ads to
advertisers and their agencies. These are displayed on Google.com
and partner sites through our
>AdSense program. We get paid when
consumers click on the ads.
DoubleClick is in the ad-serving business and has two primary
products. DART for Advertisers is an ad server that gives
advertisers/agencies the tools to plan, deliver and report on their
online ads. DART for Publishers gives publishers the tools to place
ads on their site, optimize them, and assess placement to make the
best use of their ad inventory. For the most part, DoubleClick is
paid by advertisers and publishers to serve and report on ads.
These are two vital and interrelated functions. Allowing agencies
and advertisers to deliver ads in the right context and monitor
their effectiveness maximizes the return on investment for a given
ad or campaign. Ultimately, this leads to better and more relevant
ads for the consumer.
Why we're buying DoubleClick
In summary, we're buying DoubleClick because:
DoubleClick's products and technology are complementary to
our search and and content-based text advertising business, and
give us new opportunities to improve online advertising for
consumers, advertisers and publishers.
Historically, we've not allowed third parties to serve into
Google's AdSense network, which has made it hard for
advertisers to get performance metrics. Together, Google and
DoubleClick can deliver a more open platform for advertisers, and
provide the metrics they need to manage marketing campaigns.
By combining Google's infrastructure with DoubleClick's
knowledge of agencies and publishers, we can create the next
generation of more innovative ad serving technology, one that
significantly improves the efficiency and effectiveness of online
advertising.
To manage ad inventory, some of the largest publishers use
DoubleClick DART for Publishers – but a good portion of it goes
unsold. It's our view that the combination of DoubleClick and
Google will help these publishers succeed by monetizing their
unsold inventory.
We believe DoubleClick can help Google deliver better, more
relevant display ads, which improves the online experience of
consumers. From a technical perspective, Google will also be able
to get web pages to load faster by reducing latency from ad
servers. Publishers will benefit by making more money from remnant
inventory and – as has been the case with other technologies
we've acquired – we hope to make ad serving more accessible.
Smaller publishers would get access to DoubleClick's ad serving
technology, enabling them to better compete in the global
marketplace.
Advertisers and agencies will benefit, too. AdSense will support
certain ad tags so advertisers will be able to use a broader
selection of formats in our ad network, improving ad relevance. And
the experience for advertisers will be more efficient, because
there will be an ad server that provides consolidated reporting and
management of display ads on all properties and networks. More
generally, we'll be able to use our technology and record of
innovation to improve the quality of existing products in the
marketplace. We intend to invest heavily in R&D and product
development to respond to the demand from publishers, advertisers
and agencies for better tools.
In short, Google’s acquisition of DoubleClick will benefit all
parties in the online advertising business, including advertisers,
publishers, agencies and, most importantly, consumers.
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