Image is everything as dot-coms cozy up to advertisers

Online advertising has long been ephemeral, changing almost as rapidly as the Internet itself. But with the decline of many Web companies, several online giants are seeking to attract nontraditional advertisers by offering more sophisticated formats that go well beyond the banner ad, the workhorse of online ads.

"This industry is doing everything they can to demonstrate to traditional advertisers that the static banner will not meet their needs and will not be what they put their budgets against long term," said Allie Shaw, a vice president of marketing for Unicast, which is creating new online ad formats.

"We want to be able to replace what is a plummeting banner price and performance with an ad unit that advertisers build by and measure the same way they do other media such as TV," Shaw added.

While publishers hope the new formats will boost their revenues in a period of uncertainty, the changes could prove jarring to readers and risk backfiring if the sites go too far.

"People see hundreds of banners a day. Five years from now, it could be thousands. It has the potential to become like the Las Vegas strip or worse, beyond the pale of any zoning laws or overall design constraints," said David Halperin, senior analyst at eMarketer.

"At some point, if the clutter of obnoxious ads goes beyond a certain point, the Web surfer will avoid offending sites," he added. "The market itself must keep things in a rough balance."

Banner ads, which measure about 1-by-5 inches, typically snare the most money but generate the fewest clicks. Since such ads debuted around 1995, this so-called click-through rate has plunged from an industry high of 10 percent to about 0.4 percent, according to Nielsen/NetRatings. The decline has caused some of the largest Internet media companies to race back to the drawing board for more effective formats.

Mulling different formats
Microsoft's MSN, CMGI's AltaVista, eUniverse, RealNetworks, Walt Disney and CNET Networks--all freeways for heavy Internet traffic--are among those testing new ad formats that they hope will be more attractive to advertisers.

Earlier this month, Microsoft's Web properties unveiled several new options for advertisers, including larger ads that let consumers interact with products inside the banner without leaving the original site.

CNET, publisher of News.com, is testing a similar large, self-contained banner that is roughly the size of an index card.

Disney is testing what it calls a "big impression" ad, which is 30 percent larger than a traditional banner. These ads will be situated in prime real estate on all Disney properties, including ESPN.com, Family.com and ABCNews.com, the company said.

The goal is to create ads that combine the expressiveness of a TV commercial and the interactivity of the Web.

"Advertisers need to quit thinking of online advertising as the gum at the checkout isle, because not every product is an impulse buy," said Christopher Todd, an advertising analyst at Jupiter Media Metrix. Rather, he said, advertisers should consider the potential for branding that the Web offers.

Pop-up pros and cons
Several major sites are embracing ad formats that attempt to bridge this gap. RealNetworks, AltaVista and eUniverse this month will start selling the so-called superstitial, a speedy variation of a pop-up ad that includes sound and animation.

Superstitials are preloaded, so they play automatically and generally run 20 seconds. Although Web visitors can simply close the ad before it finishes running, Unicast, the ads' creator, says that's a good thing.

"You have to give the user control over the ad experience," said a Unicast representative, adding that the onus is on the advertiser to create a compelling ad that targets the right visitor. Unicast touts click-through rates between 6 percent and 7 percent, outperforming banners.

Shawn Gold, eUniverse co-president, said the ads are one step closer to a TV commercial, an attractive quality to traditional advertisers. "Every advertisement since the Internet was created is just a bridge solution until it eventually reaches a TV-type ad."

But pop-up ads are typically thought of as the black sheep of Internet advertising. They appear over a requested Web page, cover about three-fourths of the page, and slow the delivery of a page.

Internet giant Yahoo refuses to use any kind of pop-up ad because it says they interfere with the visitor's experience. But the portal has adopted other types of advertising and promotions.

For example, Pepsi approached Yahoo this summer looking for a campaign that didn't include banners, so it built a promotion that incorporated Pepsi's age-old "under the cap" campaign. Yahoo created a page where players could tally cap points and use them to shop online.

Is it an ad or a feature?
Blurring the lines between advertising and content, Disney has introduced an ad dubbed an ActivAd, which lets search results trigger content. For example, if a Web visitor searches for ski resorts on Go.com, an ad box in the middle of the page could show several links to ski resorts for Travelocity. Yahoo and others offer similar options.

"Big ads are more compelling to advertisers for branding, (while) ActivAds encourage interaction," said Susan Murdy, a spokeswoman for Walt Disney Internet Group.

RealNetworks is working with Princeton Video Imaging to incorporate subtle advertising into special events that are broadcast over the Internet. During a broadcast of a baseball game, for example, the company could superimpose ads throughout the stadium that can be seen only by Web surfers.

Much of this innovation will be used to lure automakers and packaged-goods companies to online advertising, which represent two of the fastest-growing categories, according to Jupiter Media Metrix. By 2005, automotive advertising sales are expected to reach $2.1 billion online, and package-goods advertising is expected to hit $1.1 billion, up from $300 million and $100 million, respectively.

Despite the dissatisfaction with banner click-through rates and related angst, banner ads will not become extinct. "Banners are still very cheap, easy to use, and universally accepted by Web sites," said eMarketer's Halperin.

But hasty judgment, caused by the nature of fast-moving markets, may be more responsible for negative sentiment about Web advertising than are weakened results.

"The problem is that every time someone comes up with something new that does work, everybody starts doing it with the result that it stops working," Halperin said.