We unveiled the new Ad Exchange in late 2009 in North America and Europe, as an open, real-time auction marketplace for display ad space—i.e., the image-based, interactive or video ad formats you see on most sites. The Exchange brings together ad networks, agency trading desks and demand side platforms on one side, and major online publishers on the other, to buy and sell display ad space in real time, allowing advertisers to reach the right ad to the right consumer at the right time and enabling publishers to connect with the advertisers most interested in what they’re offering. Our goal was to grow the overall display advertising pie, so that publishers could benefit from higher ad revenues that fund their investments in the online content and services that we all read and use every day.
With a full year under our belt, we’re happy to see that the Ad Exchange has proven itself so useful for so many participants. As of today, there are hundreds of premium publishers making ad space available, in addition to the many niche publishers that participate in Ad Exchange through the AdSense program. The number of transactions that occur every day has tripled. And the Ad Exchange is now becoming available in new countries.
To see how what kind of effect the growth of the Exchange was having on its participants, we undertook an analysis that quantified the Exchange’s impact on participating publishers’ bottom lines. Today, we’re publishing a white paper that shows that when publishers make ad space available in the Ad Exchange, and the Exchange wins the auction, publishers generate, on average, 188% more revenue compared with indirect sales to ad networks and other third-party buyers. Over millions of impressions, this can make a huge difference to publishers’ advertising revenues, which is great for the web as a whole.
This 188% increase is a result of two key trends that we’re seeing:
- Demand for publishers’ inventory is increasing as more AdWords and Google Display Network advertisers start running display campaigns, get great results and invest further. For example, display advertising spend among Google’s largest 1,000 advertisers increased 75% in the past year. Agency trading desks and new third-party technology providers are also running more display ads through the Ad Exchange. And real-time bidding—which enables advertisers to tailor their bids and ads in real time to buy the ad space they value the most—continues to be a major draw, now accounting for 56% of buyers’ spend.
- We’re seeing publishers increasingly leverage the Ad Exchange’s “dynamic allocation” to sell their inventory. Via dynamic allocation, the Exchange compares—in real time—the value of the highest-paying ad in the Ad Exchange with any ads from other sources (such as ad network deals) and chooses the highest paying one. The Ad Exchange only serves ads when it can offer a higher price for ad space. Of course, publishers are in complete control of which networks they allow to bid, what ads can appear on their sites and which ad space they make available.
2010 was a huge growth year for the Ad Exchange, and the increased volume has made it a more vibrant ecosystem for buyers and sellers. We’ll continue our work to ensure that the Ad Exchange delivers ever-improving returns and controls for publishers, so that more participants can benefit from the huge growth taking place in display advertising in 2011 and beyond.
