The web is abuzz today over Google’s announcement that they have acquired Teracent. Teracent offers a technology to optimize display ads for click-thru in the same way that Google optimizes text ads. Teracent’s secret sauce is it’s ability to mix and match graphical elements to design new ads and then optimize their delivery. As Andy Beal puts it, it’s “multi-variate testing for your banner ads.” But multi-variate testing to what purpose? The only response Teracent can measure is clicks; so that’s what they measure. That’s fine if you are focused on direct response from your display ads, but in that case you are better off buying text ads. Text ads are cheaper, and likely just as, if not more effective.

Traditionally, display advertising has been about brand awareness. Unfortunately, there’s no direct way to measure that, and so it’s ignored by Teracent. My (relatively uninformed) guess is that Teracent will optimize these display ads towards those that have a direct call to action. If what the advertiser wants is a direct action that’s fine. But, if you want to launch a brand with this kind of display ads, then this kind of optimization won’t work.

Despite an attempt to add a crippling amendment, and the (surprise) opposition of Barney Frank, the bill passed. Here’s the Youtube video:

For more details, see Mish.