Google now with DoubleClick Ad Exchange

Google is about to launch its most potent weapon to date in the battle over the $15 billion market for display ads—the pictorial banners and videos that support most major Web sites. On Sept. 18 the search giant will launch its new DoubleClick advertising exchange, a sort of stock exchange for online ads it has been developing since early last year.

Google's (GOOG) exchange lets Web sites offer space that ad agencies and online brokers called ad networks can bid for in an automated auction system. Advertisers hope to get a wider choice of ad space and the ability to target ads more precisely to the most likely prospects. Publishers hope to net higher rates than they can from the hundreds of ad networks—which generally pay very low rates—and sell more of the ad space that today goes unsold. As BusinessWeek reported three months ago, Google's ad exchange has been widely anticipated because of the company's growing influence over online ads.

The goal for Google is to make display advertising, which currently requires a lot of time and effort to create and distribute on thousands of sites, much simpler to deploy so that many more advertisers and publishers can run the ads. Because of the existing complexity, as well as advertiser uncertainty over display ads' effectiveness, text search ads such as Google's have grown far faster than display in recent years. "The idea is to grow the overall display-advertising pie," says Neal Mohan, Google's vice-president for product management. "Display advertising is still not living up to its full potential."

It's far from certain that Google will succeed with its new exchange. The giant dominates the market for search advertising, garnering about half the industry's total revenues. But it has struggled to expand into new fields, such as radio and print advertising, and its efforts in display ads have seen little success so far. Search ads still constitute over 95% of Google's revenues. The company's display-ad exchange, an early version of which Google picked up early last year when it acquired online ad-placement firm DoubleClick for $3.2 billion, will face competition, too. Yahoo! (YHOO), Microsoft (MSFT), and others already operate their own exchanges.