Google Nabs Teracent to Improve Display Ads

Google is aggressively going after Yahoo and Microsoft in the market for online display advertising.

Two weeks after agreeing to buy mobile display ad specialist AdMob, Google Nov. 23 said it has purchased display ad specialist Teracent for an undisclosed sum.

For its core Intelligent Display Advertising, Teracent uses machine learning technology to pick and choose from thousands of creative elements in display ads, including images, products, messages and colors.

These elements can be augmented using information such as geographic location, language, Website content, time of day or the past performance of different ads.

“Teracent deploys an unlimited number of ad creative combinations (using your catalogs, databases, images and messages) through a single ad unit. Then, sophisticated machine learning algorithms instantly select the optimal creative elements for each ad impression–based upon a real-time analysis of which items will convert from impressions into sales,” Teracent explains on its Website.

“This technology can help advertisers get better results from their display ad campaigns,” wrote Google’s Neal Mohan, vice president of product management, and Joerg Heilig, engineering director, in a Google blog post about Teracent. “In turn, this enables publishers to make more money from their ad space and delivers Web users better ads and more ad-funded Web content.”

Google said it expects to close the deal this quarter and to make Teracent technology available to DoubleClick clients and clients who run display ad campaigns on the Google Content Network.

While Teracent might seem like a small purchase for Google in the wake of the search engine’s $750 million bid for AdMob, the deal underscores Google’s commitment to boosting its display ad market share, which lags behind display ad market leader Yahoo and Microsoft.

Google has led the market in paid keyword advertising for nearly a decade but it has yet to make much of an impact in the valuable display ad realm, where Yahoo has made billions of dollars serving graphical ads that attract attention touting products, people and services on Websites.

Yahoo commands 14.5 percent of the display ad market, while Google ranked sixth at just 2.2 percent.

Google moved to fortify its display ad arsenal by acquiring DoubleClick for $3.1 billion in 2007, and later AdMob, which customizes display ads for small screens on smartphones, which have full Internet browsers that make them a rich new playground for mobile ads.

Interestingly, Teracent also serves targeted mobile ads (for Yahoo, among others), so there may be some overlap with AdMob. Teracent also helps advertisers optimize video ads and its technology could conceivably aid Google’s YouTube video-sharing Web site.

Read what others are writing about this deal on Techmeme here.