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Google CEO Eric Schmidt made an appearance at the Morgan Stanley Technology Conference in San Francisco yesterday.

During the on-stage interview with Mary Meeker of Morgan Stanley, (a little) more information dribbled out on Big G’s ad exchange and display advertising strategy.

From CNN:

Schmidt also said the search advertising company has a good opportunity to apply the “Google magic” to the display advertising business. He noted that Google is in the process of building an online advertising exchange, replete with measurement tools that will help display properties figure out which ads to show where and when.

He also said display ads must evolve into rich, dynamic spots that have value to consumer. A third challenge for Google will be to build the business relationships with large advertisers.

Silicon Alley Insider was live blogging the event and captured the following:

“Where is next source of revenue? Next source is current business functioning better. Next and adjacent is a set of display businesses and an exchange being built from DoubleClick business. Display not uniform; Balkanized. By hand or poor quality spreadsheets in many cases; think we can work Google magic on that.”

And then later from SAI’s live blogging:

“What are 3 things that need to get done to get display to become part of business? First problem if you have a display property, multiple vendors building ad exchange. Heuristics are terrible. Standardization of ad formats. Need more. Especially around interactive and video ads. Future is an ad that brings you in, tells narrative. Best ads add real value. Video, story, narrative, etc. Third is construction of business relationship with large advertisers, which we’re still working on.”

All in all, it’s difficult to say that anything new was learned other than an ongoing focus by Google on the online display advertising business and that Schmidt believes the number of ad formats currently in play is ridiculous and needs to be standardized.

At this point, it’s too early too tell who offers the best exchange model – and, of course, liquidity is key – which is currently nothing compared to a year or two from now. It would seem likely that Google may take out a smaller player or two who offer compelling exchange technology.

But, more than likely, Google will attempt to step on everybody else and try to become the standard for ad exchanges bringing together their Google AdSense Exchange (which David Rosenblatt discussed at IAB), DoubleClick’s AdEx Ad Exchange and Google AdWords. Google wants to be THE exchange, of course.

Look for self-service access to a Google ad exchange arriving through APIs and an ASP model, a la AdWords, by year end. From Eric Schmidt’s comments, it appears that new analytics tools are in the offing as well which could help marketers and publishers gain further insight into their exchange, display ad buys as long as they’re willing to share their data with the Big G diablo.

To listen to Google CEO Eric Schmidt’s complete interview, click here.

Yahoo!’s Premium Display Ads Pricing Stabilizes

Meanwhile from The Wall Street Journal’s Digits blog comes word that premium display ad pricing is “showing signs” as Marv Albert would say.

…Yahoo’s chief financial officer Blake Jorgensen hinted at some promising economic news. Pricing on a major piece of Yahoo inventory – the graphical ads Yahoo sells with the guarantee they’ll appear in particular spots like the Yahoo homepage – has stopped sliding, he said. Those ads, which Yahoo calls “class one” inventory have been harder hit by the downturn than Yahoo’s class two inventory, which are cheaper ads that aren’t guaranteed to run on certain properties.

“We have seen our own class one stabilize through the fourth quarter,” said Jorgensen. Yahoo announced last week that Jorgensen will leave the company once his replacement is found.

Well, whaddya know? Good news in the world of online display advertising!

Click here to listen to Yahoo! at the Morgan Stanley Technology Conference.