Why Online Display Advertising is Making a Comeback

    May 1, 2007

Thanks to Business Week, we get a clear explanation as to why online display advertising is all of a sudden hotter than a Willy Wonka golden ticket.

While display ads were kicked to the curb, when search advertising dared to offer targeted, relevant ads, with auction pricing – how dare they! – they’re making a comeback thanks to the same kind of targeting technology.

Ad-exchange services such as Right Media want to do to display what Google did to search. Exchanges increase the price of ads by letting advertising networks that track Web surfing behavior buy space, in front of users they recognize, on nonpremium Web pages—pages with content that an advertiser doesn’t specifically want to be associated with, such as Yahoo Mail pages. The networks can afford to pay more for these pages because they are delivering even higher priced ads thanks to their tracking information. “By allowing other publishers access to our inventory…we will ultimately achieve premium pricing from both of those elements,” said Susan Decker, Yahoo’s chief financial officer, on a conference call following the announcement.

So, online display ads – which used be called simply “banner” ads – have now grown-up. They’re better targeted to visitors, include more interaction, and are using the same pricing structures that helped search ads become popular. While it’s unlikely that display ads will ever pass search ads in terms of market size, with the help of Google, Yahoo and MSFT, they’re certainly destined to claim a strong second place.