DoubleClick intros ad exchange system

Ad brokering exchange is expected to launch globally by the end of the year

DoubleClick, an online ad services provider that is reportedly in acquisition talks with Microsoft and Google, has begun a limited test in the United States of an ad exchange marketplace that it expects to launch globally by the end of the year, the company said Wednesday.

The news comes at a time when DoubleClick's majority owner, the Hellman & Friedman private equity firm, reportedly wants to sell the company and Microsoft and Google are said to be interested in it. This places DoubleClick, founded in 1996, at the center of the latest power struggle between Google and Microsoft, archrivals in hot markets such as online advertising, Internet services, and business software.

By consolidating inventory in a single marketplace, the DoubleClick Advertising Exchange is designed to help ad sellers market ad inventory that often either doesn't get sold or goes for below-market prices, while assisting buyers in finding ad space they may otherwise not know is available.

The DoubleClick exchange lets sellers set minimum bid prices for their ad space, as well as establish rules for the sale of the inventory, such as restricting certain advertisers, formats, and content. Meanwhile, buyers say upfront what types of inventory they want to purchase, along with a bid price that can be automatically adjusted based on demand.

As part of its ad brokering exchange, DoubleClick will also handle transactions and make payments to the seller.

The exchange, which will focus on display ads, such as banners and other graphical ads, will complement DoubleClick's existing services for linking ad buyers and sellers. The DoubleClick Advertising Exchange will compete against the likes of Right Media's Exchange, a similar marketplace introduced in June of last year.

As the online ad industry matures, exchanges become compelling to both advertisers and publishers, said industry analyst Greg Sterling, of Sterling Market Intelligence. Advertisers like exchanges because they add transparency to the process of buying ads, while publishers get help marketing remnant, hard-to-sell inventory, Sterling said.

However, there are now several online ad exchanges operating, and if there isn't consolidation in the market, none of them will be able to deliver on their value promise: the convenience of offering advertisers and publishers a broad clearinghouse for ads, he said. There can be no more than two online ad exchanges; otherwise they become simply ad networks, he said. "If there are six or seven exchanges, then it becomes self-defeating. They cease to be meaningful," Sterling said.

Right Media is arguably the leading exchange right now in a market in which a key to success is to attract a lot of publishers and advertisers, Sterling said. "You have to have a lot of participation and attract a critical mass [of buyers and sellers]. You need to have reach and scale and build volume," Sterling said.

Michael Rubenstein, vice president and general manager of the DoubleClick Advertising Exchange, is confident that the company will be able to leverage its existing client base to populate its new marketplace. The exchange is highly complementary to DoubleClick's Dart family of ad management services, which is geared toward linking advertisers and publishers for so-called premium, in-demand ad inventory, he said.

Copyright © 2007 IDG Communications, Inc.

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