Is the DoubleClick Exchange a game-changer?

Yesterday Google announced the launch of DoubleClick exchange, sending ripples down the blogosphere and beyond. A good list of discussions is available at TechMeme, one of the best ones being Andrew Goodman’s at Traffick.

Reading the blog post alone can be confusing. The platform is positioned as DoubleClick Exchange, specifically, and not Google Exchange. DoubleClick is the enterprise brand that completely dominates the ad serving market and has reach over 80% of large publishers and probably just as much, if not more, large brand advertisers. Why, then, does Google talk about integrating this platform in Google AdWords, the openly accessible ad platform where you can open an account with 10$, and not DoubleClick for Advertisers which agencies use? All while maintaining that this initiative “helps large online publishers on one side; and ad networks and agency networks on the other”?

Large publishers, after having flirted with ad networks and ad exchanges such as Yahoo’s Right Media, are notoriously cautious of anything that can commoditize their inventory. The big concern, of course, is the notorious pork bellies problem which occurs when advertisers cherry-pick inventory and throw away impressions that don’t interest them. By far, that is the publishers’ highest priority given the rise in popularity of real-time bidding mechanics and the loss of ad budget commitments that comes with it. It just happens that this is also the exact value proposition of ad exchanges to advertisers and agencies.

There are two ways to make this viable for an exchange: 1) Try to fill all the inventory holes created by real-time bidding; and 2) Deal mostly with remnant inventory, creating little value compared to competitors.

The market is not nearly mature enough to make the first option happen anytime soon which will reduce the DoubleClick Exchange to a glorified AdSense for display, focusing mostly on the long tail and not making much of a splash in the brand advertising world.

There are some moves which may make this more interesting for advertisers, such as deep integration of the exchange in DoubleClick for Advertisers,  but Google may have to risk some of the handsome revenue they make on ad serving from the DoubleClick products somewhere along the line. Imagine a scenario where the publisher uses DFP, the advertiser uses DFA, and a third party network uses the exchange. That just seems like too much dipping.

Generally speaking, ad exchanges will become an important component in the creation of a global ad ecosystem where hyper-targeting is universally possible across multiple properties. A big part of this problem remains the legacy ad serving infrastructure used by large publishers and for which DoubleClick is largely responsible.  It really feels like it’s finally time for the next generation of ad serving platforms — a generation that plugs into exchanges and data sources alike in order to create actual competitive advantages for publishers and for advertisers.  From the technology standpoint, publishers don’t have to be part of marketplaces or put their inventory on the block to enable third-party targeting and truly leverage data.

It’s great to see at least some development in the market that is, as Andrew Goodman says, “in a frustrating state.” Too many are talking way too much science fiction and not doing enough problem solving.  We don’t need to do easier display advertising (as Google positions the exchange). We need to derive and show more value, which today means more integration on data and formats, and that definitely does not mean equating it to direct response.

Let’s concentrate on that, shall we?