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You may have seen our post on the Official Google Blog, announcing the new DoubleClick Ad Exchange. The Ad Exchange is a real-time marketplace to buy and sell display advertising space.

The “buyers” in the Ad Exchange are typically ad networks and agency-run networks with their own ad serving and optimization technologies, while the “sellers” are large publishers.

We’re excited about what the launch of the Ad Exchange means for you, our advertisers. Ad Exchange sites will now be available for you to advertise on, as part of the Google Content Network, through your AdWords account. These sites are made available to you when Ad Exchange publishers choose to allow AdWords advertisers to compete for their inventory, and as long as that inventory meets all AdSense policy requirements.

So when you advertise on the Google Content Network, your ads will now be eligible to run across additional high-quality placements on those Ad Exchange sites, in addition to the hundreds and thousands of placements your ads can run on in the Google Content Network.

These placements will appear like any other Content Network placement in your AdWords reports. Like all Content Network placements, you can use the Placement Performance Report to see where your ads ran, which placements performed best, and act on that information by increasing or decreasing bids based on each placement’s performance. On occasion, an Ad Exchange site may choose to remain anonymous, in which case, the site will appear in your reports with an anonymized label like “123456.anonymous.google.” You can choose to exclude this placement, just like you can exclude any placement in the Content Network, if you see it’s not meeting your performance goals.

You can still use all the AdWords targeting, bidding, formats, reporting, and controls for the Content Network that you’re already familiar with. This just means that there will be more high-quality sites that you can access. As always, sites must meet the same quality requirements that we apply to all sites in the Google Content Network. Also, this change does not affect your search campaigns.

You can learn more about how the DoubleClick Ad Exchange can benefit you in the AdWords Help Center.

If you’re not currently using the Google Content Network, you can learn more about how to get started here. If you’re using the Content Network but have never tried running display ad formats, you might check out our Display Ad Builder tool, which can help you create new display ads in minutes.

For today’s Inside AdWords post we have a note from our Chief Economist at Google, Hal Varian. Hal and his team spend most of their time studying the AdWords auction and finding ways to make it more efficient. Today he’d like to share a new tutorial he and his team have put together on how to bid for maximum profitability on AdWords:

Last month we launched a new feature of AdWords called Bid Simulator. Bid Simulator takes some of the guess work out of cost per click (CPC) bidding by estimating the number of clicks or impressions you could have received if you had used a different maximum CPC bid. Today, I thought I would take the opportunity to help you make the most of this new feature by explaining how to use the data from Bid Simulator to maximize the profit from your marketing investment.

In general, when you increase your maximum CPC bid for keywords on search you are able to generate more clicks to your site. This may be because your new bid qualifies you to appear higher up in the Sponsored Links on the search results page, or because your higher bid qualifies your ad to appear in new, more expensive, auctions. The goal for you as an advertiser is to decide whether or not these additional clicks come at a cost that is still profitable for you.

To make this decision, you need to compare your expected value per click to your incremental cost per click. Your value per click is how much a click for a particular keyword is worth to you, on average. Your incremental cost per click is how much extra you are paying, on average, for the extra clicks you are getting from your higher bid. When your value per click is higher than your incremental cost per click it makes sense to increase your bid. On the other hand, if your value per click is lower than your incremental cost per click, you probably want to decrease your bid.

In the following video, I’ll show you how to calculate these values, how to interpret them, and how to use the data to maximize the profit from your marketing investment. My team and I are always looking for ways to help make the AdWords auction easier to understand so if you have other topics that you’d like us to address, please leave a comment on the video and we may be able to make it a topic for a future video.

Watch it on YouTube: http://www.youtube.com/watch?v=jRx7AMb6rZ0