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Google (GOOG)
Does Google's DoubleClick Service Ad Up?
The allure of a $7.6 billion graphical display ad market was too much for Google to let slip away to competitors like Yahoo (YHOO: Charts, News, Offers) and Microsoft (MSFT: Charts, News, Offers). As a result, the search engine icon made a decision 18 months ago to buy DoubleClick Incorporated, a popular online ad server, for $3.2 billion. Google's rationale behind the purchase was to use the server's customer network and display technology as a gateway into the display ad market. Well, that "gateway" is officially open for business. Google announced that it will launch its new DoubleClick advertising exchange feature public today. What exactly is this new service? And what does it mean for Google's future?
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The DoubleClick advertising exchange is a network that allows websites to post available ad space for advertisers to bid on. Google has had extensive experience and success with similar ad network arrangements. However, the difference is, unlike Google's past ad networks, the DoubleClick service concentrates on display ad offerings. The idea behind the ad network model is that advertisers are privileged to a wider choice of advertising mediums and a more focused scope of content targeting while publishers hope to receive higher rates for their unsold inventory than with other remnant inventory options. Google turns a profit by taking a small cut of all the brokered deals on the network. Google's display ad network launch has generated such a buzz because Google is the leader in text based ad networks. Now, the online search engine franchise wants to try its hand at display advertising.
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Most of the display ad market share belongs to Microsoft and Yahoo, so Google will have to work hard to carve out its own customer following. However, it already has a pretty solid head start thanks to DoubleClick's existing client list. Google's access to DoubleClick's customer network coupled with the search engine's expertise in text ad networks are the cornerstones for its success in the display ad realm. While it may appear that Google is posed for positive results, nothing is a guarantee in online advertising.
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Overall, Google seems to have developed a strategy that effectively combines DoubleClick's competitive advantages with its own. Google is looking to replicate its text based ad network model with display ads. However, there is outside speculation that Google may not be able to overcome the barriers to entry associated with the display ad industry. It seems that Google's past experience and expertise in text ad networks coupled with DoubleClick's existing client list will be enough to propel it over the entry hurdle, but Google has struggled in the past trying to breach the radio and print advertising markets. While those examples may not be perfect parallels, it does illustrate that even Google is not immune to failure. Regardless, Google is optimistic about its move into display advertising, and is hoping to click its way to the top of the display ad industry with its new DoubleClick advertising exchange.
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Other Commentary on Google's New Network
Google's New Display Ad Program Could Hurt Big Sites -- A interesting outlook on the Google network's impact on publishers, both big and small.
Google Draws Upon Expertise in Search Advertising to Sell More Visual Marketing Messages -- A discussion about Google's ability to dominate display ads like it does text.
Google Unleashes DoubleClick Ad Exchange -- A blogger's breakdown of Google's three principles for approaching display advertising.
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