Ok, so everyone knows now that Google bought DoubleClick for $3.1B in cash. I'm going to tell you why they did.
Banner advertising, especially using large ad networks, isn't very profitable. For advertisers, it's a black box of publishers -- you don't know what's working so your optimization efforts are limited. For publishers, it's usually untargeted advertising and something you do with all your remnant inventory. You book the tag in your ad server along with several other networks (since one network alone usually can't increase your sell-through to 100%), and do your best to optimize your eCPM.
Google has been achieving/offering vastly improved eCPM, so why then buy a traditional ad network which is far less profitable than their own business? There are a few reasons:
- Changing their creative. The AdSense ad unit is old and far along the lifecycle of creative effectiveness. Everyone has seen it, so click-through is stale. Google is looking to couple their contextual/behavioral technology with display ads.
- New publishers. The AdSense network appeals to a certain Web site size/type, and they're now facing market saturation -- new publisher sign-ups have to be slowing. Larger Web sites don't use Google AdSense and have a far greater reach. They use ad networks to sell their remnant inventory though, so this is a quick way for Google to add a relatively small number of publishers, but a HUGE number of page views.
- Data. In the end, it's all about the data for Google. What with AdSense and Google Analytics tag proliferation across hundreds of thousands of Web sites, Google toolbar users, and of course 60%(ish) of all search queries, they already have an impressive data stream to crunch. About the only thing they *didn't* have is their ad tag on hundreds of the more popular sites that sell their own display advertising.
It's all about profiling and monetizing those profiles with relevant advertising. They know much more about each one of us than you think. The next obvious step for Google was display advertising, and if they can build a long-tail of display advertisers like they did with keyword/text advertisers, while leveraging their profiling data and auction bidding system, they can make a ton more money for themselves and publishers.
Google isn't a search company, they are a "user profiling and advertising" company.