Late last week Venture Beat reported that Google and Publicis had announced plans to work together.

Publicis will contribute ad creators and clients. Google will contribute ad inventory, delivery and analytics. They each have something the other needs. Seems like a good match.

Wearing my AdHack hat, I can tell you this is a small announcement that points to larger trends in the ad industry. So here’s the big-picture in less than a thousand words.

• Everyone is building ad networks. You can’t swing a dead script in hollywood without hitting one. The big ones are getting bigger, the niche ones are growing more niches.
• Everyone else is building ad analytics / optimization / delivery technologies to run on those ad networks. These folks are hoping to insert themselves into the new advertising value chain that’s taking shape.
• Everyone not building an ad network or analytics / optimization / delivery technologies is building something for web video. This is the shift to something that’s previously been called ‘web TV’ but will be something different. Even the TV industry kinda sees it.

So the volume of ads being served is exploding.

And the advertisers placing the ads or the agencies acting on their behalf know more and more about those ads.

And the more then know, the more they realize that they need specific, custom, fitted ads for each place they advertise. Adopting techniques from other media — repeat the hell out of the same ad! — is like dancing to swim.

And since media is fragmenting from mass to micro, more of those places pop up all the time, all of them with different factors to consider. Now advertisers know about all those factors too since they know so much more about their ad performance.

Mix in more contexts, more advertising outlets and more data about ad performance to prove that the one ad needs to be a whole bunch of ads. That those ads need to evolve and get selected based on performance in tight, quick feedback loops. That new ads need to get built all the time.

Except: who’s going to produce all those ads? All the variations to test and use, test and use, test and use.

Ad creators in agencies are organized to build a few big ads in a long, intensive process. What if they need to build tons of tiny ads in fast, lightweight processes? That no work so well.

The cracks are already showing. Two new models are being pursued today to deal with the inelasticity of ad creation:

1. Automating ad production from standard ad creative units. Take an off-the-shelf ad, make a few aspects variables that an algorithm can tweak for contexts and you have a potential solution. If the variables are significant enough to affect performance. If the ads can just generally not be that good, but scalable.
2. Offshoring production of ads. Big agencies have bought creative shops in China and India so they can build the ads cheaper to satisfy demand. Of course, those agencies still have those ad creators locked up and control what work they do. So not many more ads will get produced. And how many Chinese ad creators understand the micromedia considerations of Cargill’s market in Des Moines, Iowa? I’d love to read that brief.

Will either of these approaches work? Dunno.

But we proposed AdHack as a better way to address the problem. AdHack fits in as the place where ad production can get scaled up with content. Where a product’s users, a micromedia outlet’s audience, or anyone with desire, time and skills can make the ads. Where ads can be found and customized to fit advertisers’ needs. Or ads can be commissioned, tested, selected and delivered from a creative community.

Final thought: in announcing the Publicis / Google deal, Google CEO Eric Schmidt made two pretty interesting quotes.

First: “It is possible that what emerges could drive the development of ‘open source advertising.”

Second: “Google is many things, but one thing we are not is creative. We’re a bunch of programmers, basically.”

Both indicate to me that Google sees the problem, sees how it can affect their business, but doesn’t know how (or want) to solve it themselves. My hope is that AdHack solves it for them. That’s what we’re here for.