Guest Article: What to expect from the Google Ad Exchange
- September 21, 2009
- by Satish Jayakumar
Note from Latitude:
Following the launch of the Google DoubleClick Ad Exchange on Friday, who better to seek an opinion on this new development than Satish Jayakumar, COO & CoFounder of European Ad Exchange AdJug.
This guest blog post looks at the benefits of online ad exchanges and the likely impact of Google’s entry in the market.
Google is all things to all people, isn’t it? From mapping to telephony and email to radio and TV – I can’t remember being able to live without it.
Over the last few years, Google seem to have become intricately involved in every single market & sector, but it’s starting to become obvious that while a lot of what they do is very nice, there’s quite a lot that just doesn’t make any money. One could argue that they have been flirting with several different products in all sorts of sectors, but nothing seems to stick.
Im not suggesting that Google is just a one trick pony. But I do think they’ve made a few pretty unfocused decisions since their IPO paying $1.65 billion for YouTube, for example.
All that said, I think have got it together again & things are about to get a lot more exciting. Why? Some time in 2007, Google rather unceremoniously went about making their biggest acquisition yet. They coughed up 3 billion to acquire DoubleClick – the world’s largest display ad serving solution. For a while afterward there was a mad feeding frenzy wherein Microsoft bought aQuantive & WPP snapped up 247 Realmedia. I’d confidently speculate that the latter two transactions were entirely meaningless & were borne purely out of fear. For Google however, the acquisition was strategic for in DoubleClick they had plans that would hurtle them to twice the size of business they are today. If you haven’t felt the tremor yet, then hold on because DoubleClick’s Ad Exchange (codename: ADX) has hit the stalls and yes, it’s going to be big.
So, as the COO of one of the major exchange platforms in the market today, I thought I’d write here to give some insight on what to expect,
What the heck is an ad exchange?
The closest likeness in the real world is a stock exchange. It’s a place where buyers and sellers of ad inventory can congregate in one place and under the right conditions facilitate trading. It will initially deal predominantly with display advertising, but in few years you can expect it to blend into the search product.
What are the advantages of an ad exchange?
Exchanges create pretty ground-breaking advantages,
• They are open markets where skill & know-how create efficiency as opposed to sheer buying power.
• They offer total equality & openness to both parties engaged in the transaction. Supply & demand determine price.
• It is the dawn of a new era where data can truly be leveraged by advertisers to engage directly with consumers. You need not serve ads or banners blindly without knowing if the consumer has any interest in your product/service.
On a stock exchange, the best traders deliver the best returns. They do this with data, bespoke technology, intrinsic know-how & expertise. Similarly the agencies/advertisers who recognize the power of data & can leverage the strength of technology and know-how are best placed to leverage ad exchanges.
What should we be worried about?
Well, that’s a hard one to pin down.
1. Google has a habit of luring us into their using their products by extending discounts & offering great returns – this is true to advertisers as well as publishers. Then when they have sufficiently weakened the competition & achieved a majority share in the market, they set about recouping their losses. We’ve all seen this happen and in search and unfortunately, we will see it happen in display as well & the final blended search/display product that will come about.
2. Doubleclick has and is the preferred ad server for most advertisers. This puts Google in a position where they totally understand the sites, times of day, type of pages, etc that are most likely to deliver conversions. Of course they will strongly deny using any of this data, they have to. But I put this to you – if it were your company, would you?
What features are going to have me excited?
For starters there’s search remarketing. For instance, a user searching for “used cars” will be targeted on other sites with ads for used cars. You will be able to buy user segments or users who have expressed an interest in a particular product. Google calls this “interest-based” targeting, the rest of us call it search remarketing.
Then there’s real-time bidding. Advertisers who have data on users who have performed actions on their site i.e. a user who left at the shopping basket stage of a e-commerce site can be specifically targeted with a specific “come back” creative whenever he/she appears on a site within the Google ad exchange. In short, display will start to make up what search loses.
Will this be the end for agencies?
Hardly. People have been predicting the death of the agency model for years & its just not going to happen. They may come under a bit of margin pressure, but that’s about it. The other important thing to note is that search is very different to display. In search, the demand for a keyword exceeds the available clicks for the keyword, which makes it easy to increase price. In display, there is no shortage of impressions available to advertisers. Those that are able use relevant technology to sift through those billions of impressions to target users more effectively will be winners in this process.
Display is tough game with some seriously big companies entrenched in the sector. It will be interesting to see how Google copes with the challenge of entering an industry as the underdog.
2 Comments
DIGITAL MARKETING MATTERS
Philip Wilkinson
Interesting Satish. Any thoughts on how it will affect Adjug in terms of competition?