DoubleClick to Set Up an Exchange for Buying and Selling Digital Ads

April 4, 2007
Advertising
DoubleClick to Set Up an Exchange for Buying and Selling Digital Ads

By LOUISE STORY
DOUBLECLICK, which delivers marketing messages to Web sites and monitors how many clicks they get, plans to announce today that it is setting up a Nasdaq-like exchange for the buying and selling of digital advertisements.
The service may make DoubleClick a more attractive acquisition target, according to advertising industry executives.
DoubleClick, which opened in 1996 as a pioneer in the placement of banner ads online, has evolved into a company that serves â€” separately â€” both buyers and sellers of digital advertisements.
For advertising agencies and media buyers, it helps place ads online and gauge the effectiveness of campaigns. For Web publishers â€” companies that publish Web content and accept ads on their sites â€” DoubleClick delivers the ads to the Web sites and sells software that helps make the most of available space.
The new DoubleClick advertising exchange will bring Web publishers and advertising buyers together on a Web site where they can participate in auctions for ad space.
DoubleClick, based in New York, views the exchange as the centerpiece of a growth plan and may derive the majority of revenue from the new service within five years, said David Rosenblatt, the companyâ€™s chief executive, said in an interview yesterday. â€œWe already have the largest sellers and the largest buyers,â€ he said. â€œThis will link them for the first time.â€
He described the exchange as a mix of eBay and Sabre, the airline reservations system that travel agents use. The service will let advertisers see information about what competitors bid for particular ads, in the same way that eBay shows visitors past bids. And it will let publishers try to ensure that they sell their ad spots at the highest possible price, the way that airlines try to do with the seats they sell.
â€œThe value of our company depends completely on our ability to maximize our customersâ€™ revenue,â€ Mr. Rosenblatt said.
Some of the biggest names on the Internet appear to have already seen the value in DoubleClickâ€™s service â€” or its potential. Google and Microsoft are pursuing bids to buy the company, according to The Wall Street Journal, which said that DoubleClickâ€™s owner, the private equity firm Hellman & Friedman, has priced DoubleClick at more than $2 billion. Hellman & Friedman, which paid $1.1 billion for the company in July 2005, did not return a call for comment last night.
The online advertisement exchange will make DoubleClick more attractive to a potential acquirer because there is much demand for such a service and little supply, industry executives said. One of the few companies that runs this kind of auction, Right Media, took in $40 million last October when it sold a 20 percent stake to Yahoo.
â€œIf you want to be a network in this kind of market, the biggest challenge you face is access to publisher-side supply,â€ said Michael Walrath, chief executive of Right Media of New York. â€œSo ad management â€” providing the trafficking and delivery services to publishers â€” is a really nice foot in the door to gaining access to those publishersâ€™ supply.â€
Historically, ads in traditional media like television and magazines have been purchased through human negotiation. But the auctions introduced by Internet companies like Google and Yahoo for search advertising have forced some advertising executives to look for more efficient ways to sell ads. Now some of the biggest names on the Internet, including Google and eBay, are seeking to participate more broadly in advertising auctions.
DoubleClickâ€™s revenue in 2006 was about $300 million, but some industry executives said that the auction service the company was introducing made it worth much more.
â€œWhoever gets them can immediately turn into an ad exchange business overnight,â€ said Dave Morgan, chief executive of Tacoda, an online advertising network. â€œTwo billion dollars will not be a stretch for that.â€
DoubleClick has signed up 35 Web publishers, advertising networks, agencies and advertisers to test the system, which should be up and running in the third quarter. Two of the testers are Advertising.com, a large ad network, and Media Contacts, an interactive media buyer that is part of Havas. DoubleClick will charge a commission for each ad impression traded on its exchange.
DoubleClick serves â€” or delivers â€” the display ads on many large Web sites, including AOL and MySpace. It is those relationships with Web publishers that industry executives see as vital to the success of the exchange and to the courtship by companies like Google and Microsoft, which are trying for a broader foothold in online advertising.
Google has reportedly offered Web publishers free ad management services â€” like those that DoubleClick charges for â€” in exchange for the ability to sell premium ads on their sites.
Most of the ads for sale on existing exchanges are leftover space that big advertisers are not interested in, said Shelby Saville, a senior vice president at StarLink, a media buying firm within the Publicis Groupe.
But, exchanges help add transparency, Ms. Saville said. Advertisers often do not know exactly which sites their ads run on with ad networks, and an exchange could remove some of that unknown factor, she said.
DoubleClick will allow Web publishers to sell their ads on their sites without identifying themselves. Some Web publishers may want their ads sold along with the name of their sites, but others may not want advertisers to see that they sell ads at a lower price on the exchange than they do in traditional negotiations. And DoubleClick will let Web publishers hold private auctions in which they invite only select ad agencies or advertisers to bid on their ads.
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http://www.nytimes.com/2007/04/04/business/media/04adco.html?ref=technology

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DoubleClick to Set Up an Exchange for Buying and Selling Digital Ads

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DoubleClick to Set Up an Exchange for Buying and Selling Digital Ads

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