In April we announced that we're buying DoubleClick, a leading company in the ad serving business. When we made this announcement, we gave some of our reasons. But because online advertising is complicated, I thought I'd step back a bit and offer some more context. If you're an expert, please bear with me, as some of what follows will seem elementary to those already familiar with the online advertising world. If you're not, I hope this gives you a better understanding of how advertisers, publishers, ad serving companies, agencies and other companies such as Google all fit into this exciting new mix.

A little history
In the earliest years, online ads were simple banner ads on websites. Advertisers would purchase these banner ads for those sites their customers would likely visit. A tire company, for example, would place banner ads on sites for automobile enthusiasts.

An innovation followed: Text-based ads targeted at search. Type “drip irrigation� into a search engine and up pop ads, or “sponsored links,� to gardening service and supply companies. This development made online advertising accessible to small advertisers for the first time. According to a May 2007 IAB (Interactive Advertising Bureau) study called the "Internet Advertising Revenue Report," text-based search ads now account for 40 percent of online ads. Google, Yahoo! and MSN are the leaders in managing this category of text-based ads.

The same IAB study notes that display ads account for roughly another 40 percent of online ad sales. Unlike text ads, these may incorporate 3-D graphics, full-motion video, sound and user interactivity. And the remaining 20 percent consists of other categories such as email, classified and lead-generation ads.

Three portals – AOL, Yahoo! and MSN – lead the industry in display ads. Each has more than $1 billion in annual display ad revenue. Content sites such as CNET and ESPN.com are also in the game. Google, however, has been a minor player in display advertising.

Meanwhile, ad serving companies such as DoubleClick, Atlas, and MediaPlex have been helping advertisers get their ads onto these sites and measure how effective the ads are. Since Google has never played in this space, acquiring DoubleClick will enable us to complement our search and content-based advertising capabilities. Its products and technologies will help to improve online advertising for consumers, advertisers and publishers.

By enabling our AdSense network to work with DoubleClick’s delivery mechanisms, for example, advertisers can obtain more precise metrics in order to judge the effectiveness of their campaigns. The combination of the technologies and expertise of Google and DoubleClick will help publishers better monetize their unsold inventory, thus helping to fuel the creation of even more rich and diverse content on the Internet.

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Google, DoubleClick