Google Finally Links AdWords To DoubleClick; Launches Ad Exchange

*Google* is ready to fully leap into the display ad market, arguing it can do for that category what it has done for search. Ever since its $3.1 billion acquisition of DoubleClick two years ago, Google (NSDQ: GOOG) has promised to make it easy to manage both search and display sales in one place. But the launch comes a few weeks after Google lost two key DoubleClick execs, former Ad Exchange VP Michael Rubenstein and former DoubleClick CEO David Rosenblatt, who were charged with driving that business; sources say their work was largely done. Neal Mohan, Google’s VP of Product Management (pictured), who has been given responsibility for managing the display system, spoke with paidContent about Google’s expectations following a summer of tests.

The DoubleClick Ad Exchange introduces Google’s AdWords auction system to DoubleClick’s display platform just as the display category is showing some signs of life. And while Google remains as dominant as ever, it has proven vulnerable to the dismal economic trends. The new system isn’t likely to significantly boost Google’s revenues in the short term, but it is likely to solidify its hegemony over online ad sales in general. Google is aiming its display business at major publishers on the buy side, as well as the ad networks and agencies on the sell side, Mohan said.

The sell side: On the sell side, Google already has had access to large publishers, including newspapers and portals, through DoubleClick’s existing platform. But as Mohan told me, this new Ad Exchange is a complete rewrite of the DoubleClick system. The inclusion of Google’s AdSense publisher sites means a huge influx of buyers and sellers — citing comScore (NSDQ: SCOR) numbers, Google says AdSense reaches over 76 percent of U.S. online audiences and 73 percent of global online audiences.

The buy side: On the buy side, the new Ad Exchange will also present an expansion of the ad networks and agency networks in DoubleClick’s system. It already includes over 40 ad networks across North America and Europe, including most of the 25 largest ad networks in the US, with more now to be added. Additionally, AdWords advertisers will be able to run ads on sites in the Ad Exchange, using the existing format.

Sources at ad networks and agencies I spoke to are enthusiastic about the new service, but large publishers are expressing some reservations. The concerns are laced with variations of the pork bellies argument that online ad systems treat inventory like commodities. Mohan is confident that the combined Google/DoubleClick service will assuage those concerns. “The whole point is to create more revenue for everyone,” he said. “Let’s say a site experiences a sudden rise in traffic due to some news event. They’ll be able to bid inventory that would normally sell their ad space for much more. Ad space that goes for $5 could suddenly sell for $10.”

Google won’t dominate display: But many feel that Google will not be able to rule display the way it has search. One agency exec I spoke with said, “It’s better late than never, but multiple players in the display exchange give Google a significant head start over everyone else. But it’s not a zero-sum game, so I believe multiple exchanges will survive and some will still be able to thrive. The only distinct advantage for Google I see in the immediate-term is in the long-tail publisher space — they’ll be squeezing out some of the loathsome ad network arbitrage junkies.”

Another told me, “This is akin to what *eBay* did for garage sales. Display used to mostly be sold hand-to-hand. This creates a much wider marketplace than what anyone else is doing. And I would expect that platforms like AOL’s and *ValueClick* will participate in this as well.”