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DoubleClick – NASDAQ for online ads

DoubleClick announced today that the company is forming an online exchange to broker advertising between buyers and sellers. You can find good coverage in the NY Times today in this article – "DoubleClick to set up an Exchange for buying and selling Digital ads".

It was only a few weeks ago that I posted about the lack of transparency in ad pricing so it is great to see the emergence of an online market for advertising appear so quickly! DoubleClick is in an ideal position to transition into a market maker because they already have scale coupled with relationships on both sides of the advertising transaction. I am sure that we will see other ad networks adopt a similar approach.

DoubleClick could become a central piece of infrastructure around which other companies can build new products and services. This could be an interesting opportunity for startups to build analytics, programmed optimization services, audit and tracking services etc. in much the same way as there are product and service companies built around the stock markets such as the NYSE or NASDAQ.

If you have ideas for new companies in this space, drop me an email!

Comments

Joe Agliozzo

Stu, now that Google bought DC, do you think there is an opp for "someone else" to provide an alternative ad network? If you could create a network of networks that had sufficient reach, I would think that many publishers and advertisers would love to have an alternative to the "big G" or Y!...

Stu Phillips

Joe,

You make a bunch of good points and you may be right - time will tell.

I think that smart entrepreneurs will take some of the points you make (for example, ad space not being fungible) and turn that into a business. I can imagine a company categorizing ad space along different dimensions, tracking the efficiency of particular ads by category and providing an "index" that drove pricing for a particular property as an example.

I reminded of a quote from one of my colleagues years ago - "Somethings are so difficult, only our competitors can do them!"

Stu

Joe Agliozzo

Without Google and Yahoo, it's just a network of ad networks. Google and Yahoo have over 40% of online ad spending right now, right? (http://money.cnn.com/2006/10/17/technology/google_ad_revenue/index.htm?postversion=2006101714)
So, without them (which DC won't get, and even if G buys DC, you still won't get Yahoo) it's still not really a "market". I always find ad exchange ideas difficult to understand because ad space is not fungible like a stock (meaning a particular stock, like apple is the same to all buyers/sellers), ad space will have more value or less value based upon what is being advertised, how the space is used (ad quality) and also the quality of the content around the ad, which varies day to day. So therefore, how do you price that? What good is transparency when different advertisers value the space differently? Sure if it's CPM pricing, that's one thing, but think about CPC - how does a publisher know which bid to accept given the unknown of how an ad performs? Once the "contract" for that space expires, what about the next time? Another question is fraud (in the CPC arena)..

My personal view after 5 years experience in the online advertising arena is that heterogenous "network of network" businesses are difficult, and layering an exchange market on top of that even further complicates the plan.

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STU PHILLIPS
MENLO PARK, CALIFORNIA

Intense Brit, lived in Silicon Valley since 1984. Avid pilot, like digital photography, ham radio and a bunch of other stuff. Official Geek.

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