AOL ads get bigger, wider, richer

On Sept. 1, the Dulles, Va.-based company, a unit of AOL Time Warner, said it will feature so-called rich media ads throughout member pages--a move that was previously inhibited by technical limitations, despite the rising popularity of rich media.

The genre of online commercials applies to ads containing advanced sound and motion through streaming media, Macromedia?s Flash animation or comparable technology. They appear in all shapes and sizes, including expandable banners, pop-up ads, and promotions that float over a page, or "screen stealers."

With the new ads, the company is hoping to improve promotional sales on the beleaguered online service. In the second quarter, advertising and commerce revenue fell 42 percent on the AOL service, a deeper decline from the previous quarter's 31 percent drop.

The AOL service is a latecomer to the party for rich-media advertising, which has been embraced by most mainstream sites, including Microsoft?s MSN and eBay. Even Yahoo, known for reserve when it comes to advertising to avoid turning off visitors, signed ad deals this summer with several top rich media companies including EyeBlaster and PointRoll.

But while many top sites have sold technology in vogue with advertisers, AOL has largely sat on the sidelines. With roughly 35 million members, it now has expanded a partnership with Net graphics company Viewpoint Technology to sell new interactive ads; reorganized its sale staff; and started testing rich media campaigns this summer. All of this took place at a time when the company cut back on nearly 90 percent of pop-up ads in an effort to avoid overtaxing members with the commercials.

"Listening to customers and advertisers is not a mutually exclusive exercise," said AOL spokesman Nicholas Graham. Rich media "ad technology enables us to present products and services in a way that makes them visually appealing to members. There?s a middle ground to present ads in a way that?s appealing to them."

Web operators are embracing the bells and whistles of rich media advertising to better appeal to a wider set of marketers at a time when ad dollars are scant. Publishers and ad agencies view the technology as a way to create a marketing message that leaves a lasting impression with consumers, therefore giving them a means to capture the big budgets of brand advertisers, a largely untapped market. Because the ads are typically hard to ignore, they also command better response from visitors, according to research.

"In the online ad market, where there aren?t a lot of dollars and everybody?s fighting to the get them, AOL can?t afford not to sell advertising technology that all their competitors offer," said Jim Nail, senior analyst at Forrester Research.

AOL said that it started developing new advertising opportunities in response to demand from agencies and marketers. The company tapped New York-based Viewpoint, which it holds a minority stake in, to develop an advertising platform that would work with its internal AOL system, called Rainman. Viewpoint worked with AOL to design advertising units to be sold regularly on the service; the two tested campaigns from eBay and Old Navy this summer on member pages.

Previously, AOL could not run online campaigns that included 3D graphics or streaming audio and video. The company's Time Warner properties, including Entertainment Weekly, AOL Instant Messenger, People.com and CNN.com, have run such ads in partnership with EyeBlaster, EyeWonder and others.

Beyond the banner
The ads typically garner higher rates than more standard formats, depending on the campaign. In general, rich media ads command about $25 to $30 per thousand impressions, versus industry rates as low as $5 for standard formats.

AOL said it plans to charge a premium for "beyond" banner formats.

The AOL property will now sell rich media ads in banners, "out of the banner" and "beyond the banner" formats. For example, a demonstration of "beyond the banner" ads showed a chocolate truffle from Godiva that floated on the page and if the viewer clicked on the treat it would bring up a page with more information.

"Our teams have been working for a while to build added technology, to carry rich media. We listened very carefully and understood that advertisers and agencies were appealing for this kind of service to be available on AOL," Graham said.

Members of AOL 7.0, as well as of the upcoming 8.0 service set to be released late October, will be able to see the rich media ads. Macintosh users who subscribe to AOL will not be able to see the ads.

Still, analysts say the technology could alienate members. AOL teamed with Viewpoint to make the advertising viewable to its dial-up customers, which account for about 77 percent of its members, according to Nielsen/NetRatings. Those customers are usually the hardest hit by added technology on the screen.

"Even if AOL decided not to use pop-ups, rich media will still slow down the experience," said Denise Garcia, analyst with research firm GartnerG2. "They got away with not doing this before because they had such massive reach, but now they have to do this to keep themselves in the mix."