David Rosenblatt (former head of DCLK) is leaving Google. The article has a good quote from him:

“We have an opportunity to radically change the economics of this industry,” he told me. But he added: “I don’t think we know 100% what the answer is yet.”

But it also ends in saying, “With others such as Yahoo’s Right Media and OpenX’s Market exchange, already moving quickly on that front, Google can’t afford to wait very long to come up with that answer.” Setting aside the need to discuss in depth what Google’s strategy around display is (another topic for later), it prompted something which has come up in discussion recently, namely whether display advertising in particular is a winner-take-all market either on the publisher side, the advertiser side or both. An interesting question to ponder – especially with the rise of ad exchanges – and I believe the answer to this is quite different from what we have so far seen with search, where Google is hugely dominant.

Will there be a hugely dominant central marketplace for display advertising and media? Even in market subsegments, should there be a single dominant provider of “ad network optimization” such as Rubicon Project or Pubmatic attempt to provide. I believe the answer to this is no. Search, in the case of Google, because they hold several aspects of the creative/inventory mix constant, creates a constrained environment that is easier to test against for advertisers (set format for text creatives, same display of the ads, etc.). When you start talking about graphical ads on third-party websites, it’s a whole new ballgame….

There is so much “untargeted” display inventory out there, much of it of dubious value, growing at a fast rate. The costs to trying out all this inventory, however, is going to be very high for advertisers or ad networks looking to benchmark it. The notion of seeing ad inventory as a tradeable commodity is also flawed; not least because it continues to grow in supply but price doesn’t fall in lockstep because of the testing cost problem, it’s very very different site by site and the complexity of trying to normalize for all these factors is huge. Given these, the diversity and creativity of website publishers and people innovating around inventory and ways of engaging users, it’s going to be hard for any single company to effectively boil down the differences.

The market for consumer information and targeting may be more winner-takes-most (more on that later), but for managing, optimizing and running media for publishers and advertisers, I would struggle to come up with a scenario where one player could effectively control most of that. Online non-serach advertising is really difficult, it can’t be solved by just technology (though technology is very under-penetrated in the display ad market, make no mistake), and yet the opportunity for advances and the ability to scale make this (with apologies) a very INefficient frontier where promise and profit will feed a whole host of companies for the forseeable future, even those whose names don’t end in -soft, -hoo, or -oogle.