Google says it has three principles for its approach to display advertising:

1. Simplify the system for buying and selling display ads: For example, our DoubleClick ad serving products help advertisers and publishers manage campaigns and ad formats across thousands of websites and from thousands of advertisers.

2. Deliver better performance that advertisers and agencies can measure: We’re building a host of new features to help advertisers to run display ad campaigns across the Google Content Network (comprising hundreds of thousands of AdSense partner sites) and on YouTube. We’re also developing better measurement and reporting technology so they can figure out what’s working and what’s not.

3. Open up the ecosystem: We want to democratize access to display advertising and make it accessible and open, like search advertising. We recently launched the Display Ad Builder to help businesses easily set up and run display ad campaigns. 80% of advertisers who use that product have never run a display ad campaign before.

AdWords advertisers can run ads with the same AdWords interface through the exchange. Ad Exchange sites are considered part of the Google Content Network. Ad Exchange placements will appear like any other Conent Network Placement in AdWords reports. Users can still use the Placement Performance Report to see where their ads have run, and which ones performed best. Google does note, however, that Ad Exchange sites can choose to remain anonymous, and in cases like that, the site will appear in your reports with an anonymized label like "123456.anonymous.google." You have the power to exclude these placements though.
 

Google says AdSense publishers will also benefit from more advertisers coming through the exchange. The company recently announced plans to give AdSense publishers a new way to generate revenue by allowing multiple Google-certified ad networks to compete for display ad space on their sites. This is related to the Ad Exchange announcement. The Google-certified ad network capability is powered by the DoubleClick Ad Exchange.

"Certified ad networks are Ad Exchange participants who have gone through an additional certification process in order to be able to bid for your ad space through AdSense," Google says. "We call this feature ‘yield management’, because it offers you the most revenue for each ad that shows on your site in real time, regardless of whether it’s Google or another certified party who can offer you the highest bid."

Publishers using the Ad Exchange can use real-time data and bids to allocate ad space that pays the most at any particular second. They get access to more advertisers, Google manages billing and payments from networks, so publishers get one monthly payment.

Ad networks and agencies get access to more publishers, more ad space, real-time bidding, and a new API, which lets them integrate their own functionality and systems when using the Ad Exchange.

Google’s move is largely seen as its way of cutting into Yahoo’s share of the display advertising pie. This is one area where Yahoo has been quite successful, as Google has dominated the text ad market.

Google Shows Off

Stephanie Clifford at the New York Times writes about Google invading the offices of advertising agency Leo Burnett back in July, setting up some kind of mini-carnival of sorts to show off their advertising technology. It seems that the company wants to recruit agencies to use its tools, but some of these agencies believe Google has ulterior motives.

"As Google begins trying to sell television, radio and print advertising and creates tools for buying and planning media campaigns, some advertising executives and academics say that the company is working with the agencies in order to eventually displace them," writes Clifford.

Aggressive Advertising

It’s not unreasonable to suspect that Google has its own best interests in mind. Why wouldn’t it? The company does seem to be working its way further into the advertising world more aggressively than ever. For example, they’re talking about not even waiting for Federal approval before going forward with their ad deal with Yahoo.

That’s being investigated as a possible antitrust issue. Imagine if Google was able to phase out ad agencies. I don’t anticipate that happening anytime soon, however. Google is big, and it has a lot of pull, but it’s not everything. It’s a notion that even Google itself dismisses.

"I don’t see how we would be able to actually provide a better customer experience to an individual client than an agency can today," says Google Vice President for North American ad sales, Penry Price. "There’s no way we could actually line up behind one customer and offer the services and information that an agency can today."

A Lot of Ads in Google’s Future

Don’t mark the extinction of agencies yet, but there is no question that Google is getting a lot bigger in its advertising britches these days. You got YouTube ads starting to come out, RSS ads in Feedburner, and don’t forget that DoubleClick aquisition. If that Yahoo! deal goes through unscathed, that’s going to be one big chunk of the advertising market that’s going to get even bigger.