Yahoo, AOL Expand Display Ads in Effort to Entice Brands

Portals Roll Out Huge Ad Units With Interactive, Social Tools, Hoping to Spark Creativity and Effort

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NEW YORK ( -- Two struggling web companies -- Yahoo and AOL -- are looking to blow up online display advertising in order to save it, and save themselves in the process. Both are rolling out new, much bigger ad units to get brand advertisers excited again about the web's first ad medium.

AOL CEO Tim Armstrong
AOL CEO Tim Armstrong
Beset by dismal creative, cookie-cutter ad units and rush-to-the-bottom pricing driven by ad networks and exchanges, online display has had a tough run as of late. Whacked by recession, the category hasn't grown in nearly three years. Meanwhile, brands and agencies are distracted by a whole generation of new social tools from Facebook and Groupon to YouTube and Twitter.

While both are taking different strategies, they agree on one thing: bigger is better.

This week Yahoo is introducing two new units. The first, the Scoreboard, brings advertisers' content -- video, text, photos -- into an expandable unit, as well as social tools. The second, the Mag Ad, is just that: an ad that takes over the page and flips like a magazine or a catalog.

AOL is staking the future of online advertising on what it calls "Project Devil," an enormous new ad unit that includes several modules for content, images, video, Twitter feeds, Facebook integration and the like. Those ads start appearing on Moviefone and Stylist this week. But AOL has an even loftier ambition for the project, for which it spent five months negotiating with agencies, marketers and publishers.

AOL wants to syndicate these new ads off AOL properties -- even across -- on the promise that it can bring more brand dollars to publishers with a better experience than the standard units established 15 years ago.

"I think people kind of thought it was crazy out of the gate," said AOL CEO Tim Armstrong. "I was pushing really hard for it, but people are wondering, 'Can AOL be the one that instigates change in display ads?' Can we redesign the internet?"

The incentive for publishers to accept the units will be big brand campaigns that deliver a premium per page, even with other units stripped out. "The long-term benefit five years out is a better, more useful internet."

AOL is in start-up mode, and risk-taking is its only survival strategy. Yahoo, on the other hand, had to break through miles of internal red tape and inertia to get its new units off the ground, part of a group it calls Digital AdVentures.

Often criticized as tradition-bound and risk-averse, Yahoo took a big risk on its core business earlier this year when it converted its log-in page -- visited by one in three Americans each month -- into a giant, splashy ad, first for GM and then for other marketers like Macy's, Walgreens and CBS.

At the time, the notion of putting an ad on the log-in page -- the most sacrosanct real estate in Yahoo's world -- was controversial internally. "Mail is a critical component of users' lives; we've never done anything like that and don't want to jar the [users] or scare them away," said senior VP-global marketing Mollie Spilman.

The first ad went live, and Yahoo execs crowded around their analytics tools, watching for any sign of impact on sign-ins. Nothing happened. Not then, and not for the three days after as ads for the Malibu, Equinox and Traverse ran. What did happen was searches for GM cars blew up on both and Google, and 100,000 people exposed to the ads visited a GM website.

Will it work? It certainly won't hurt. The display ad market has nowhere to go but up. Revenue is flat at Yahoo and down at AOL, and with good reason: Display advertising hasn't grown since the third quarter of 2007, according to the Interactive Advertising Bureau. Stripping out fast-growing video and rich media, banner ads have grown in the single digits since 2007, according to eMarketer, and are projected to reach nearly $5.5 billion in 2010, up 8% from $5 billion in 2009.

"Right now, all display media online is basically at the bottom of the same barrel, and the only time anyone does anything good is when it's a custom media buy that you can only do once," said Benjamin Palmer, CEO of Barbarian Group, who helped AOL develop "Devil." "Better ads and some curation are going to change the market."

Brand dollars are on the sidelines, and while the ad market is strengthening, it must be triggering some schadenfreude as dollars are flowing strongest back to where they are perceived to be safe: good old TV. At the same time, Google is pushing hard into this market and throwing engineers at the problem.

"Our approach to formats is to be flexible," said Google VP Neal Mohan. "We are big believers in the fact that if you are going to spend thousands of hours on a concept, you should be able to do it on a mass scale."

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