Microsoft, AOL, Yahoo Launch Online Ad Program

An online ad partnership between Microsoft (NASDAQ:MSFT), AOL (NYSE:AOL), and Yahoo (NASDAQ:YHOO) has gone live and is now accepting advertising bids from businesses.

The project, first announced last fall by Microsoft, is an attempt by the trio to compete more effectively against Google�s (NASDAQ:GOOG) online advertising behemoths AdSense and AdWords.

While the ad platform will allow advertisers to place ads on the sites of all three companies with a single buy, ads will continue to be delivered by the companies� existing advertising arms — Microsoft Media Network, Advertising.com (AOL), and Yahoo Network Plus — using the Microsoft Advertising Exchange and Yahoo’s Right Media Exchange.

The arrangement is like a traditional ad network in some ways, but the amount and variety of unsold inventory in the ad pool and the potential reach of each ad have been scaled up enormously. It will be up to the network to accurately track the ownership and value of each placement — a potentially big challenge. In addition, the new system could blur differences between the three advertising arms — characteristics that advertisers had previously exploited to their advantage — although, as marketing news site ClickZ points out, the three networks will continue to offer clients their own data analytics and other services.

The networks use a real-time bidding (RTB) system, in which advertisers place minimum and maximum bids on ad placements meeting defined criteria for particular website and user categories.

An example might be a cosmetics company and a clothing store that both indicated a desire to advertise to women between the ages of 25 and 35 who read celebrity gossip blogs. Demographic information for advertisers is usually gleaned from tracking cookies in users� �browsers. When a user matching the advertistsers� criteria visits the website for the ad placement, the advertising program instantly pushes forward the ad belonging to the highest bidder for that slot.

Google has the advantage of having a well-established name in the digital ad sphere, but considering the amount of negative publicity the company has endured lately over its privacy practices, now might be the best time for competitors to strike. They have a long way to go to catch up, though: Google�s 2011 ad revenue of $37.9 billion exceeded those of the entire newspaper industry in the U.S.