Where is the Online Advertising Innovation?

Online advertising models are far from optimal.  Improvements would benefit everyone – from online media properties, to advertisers and even website visitors.  Improvements can only be achieved with the commitment of leading web properties and advertisers to work together to continuously test innovative new online advertising models.

Unfortunately the same standards groups that drove the initial success of online advertising may now be holding it back.  IAB standards transformed a highly fragmented online media landscape into something that large advertisers could purchase efficiently.  Rather than dealing with hundreds of ad specs, advertisers could limit their creatives to a handful of standard banner sizes. While this was critical for catalyzing initial online advertising growth, things were optimized on a less than perfect model.

For proof of potential advertising model improvements, just consider the leading search engines of 1999. Three of four are basically dead, while Google moved from obscurity to a $160 billion market cap.  This growth was largely on the back of an innovative advertising model.  Google didn’t follow the recommendations of the IAB, but the other search engines did.  Google’s new model delivered fantastic results to advertisers and provided a better experience for users.  At my current venture, we largely built our business through Google Adwords.

I believe there is similar potential for dramatic improvement in advertising on destination websites.  Again, pushing the envelop will require close cooperation between media properties and advertisers.

I first became fascinated with the potential of online advertising in 1995, when a friend showed me his business plan for an online advertising supported game site, Uproar.com.  His concept was that people would register to play free online games for a chance to win cash prizes.  Accurate registration information would let advertisers perfectly target their messages.  I had been selling print advertising so was eager to move beyond the static, untargeted world of print advertising.  In fact I took an interest bearing loan just to make an angel investment in the company.

When I later joined Uproar full time, we faced the daunting challenge of balancing advertisers’ needs for results with visitors’ desires for an entertaining experience. We launched with integrated animated advertisements targeted by demographics.  However, since our audience was so small, we couldn’t even give the ads away.  We were faced with the challenge of building a large audience and making it simple to buy advertising.  Eventually we settled on the standard IAB banners, but integrated them into the game flow to drive better results for advertisers.

There has been very little evolution in the 10 years since these standards were put in place. The primary difference today is that advertisers have become a lot more sophisticated at tracking results and media properties have added rich media.  Surely it is time for savvy publishers and advertisers to join forces to discover a much more effective way to leverage the potential of internet advertising.