||AOL's Big Idea: Larger Ads All Over
AOL Inc. is teaming up with Hearst Corp. in a bid to supersize online ads. Hearst will soon begin selling a larger type of digital ad that AOL has been pushing the industry to adopt, offering it across sites like Cosmopolitan.com, Esquire.com, Goodhousekeeping .com and Marieclaire.com. Hearst will sell the ads to its clients and pay a technology fee to AOL, which is banking on the ads to restore revenue growth.
Hearst is the first outside company to sign on to the ads, which AOL started running on its own sites in September and which are roughly four times the size of graphical online ads and appear on the right-hand side of websites. The ads include room for three interactive elements, such as videos, games, coupons, photo galleries, polls and maps. Users can click to interact with the ad without leaving the Web page.
The new ads are part of the online ad industry's broader push to make digital ads more creative so consumers pay attention and marketers spend more money on them. "Advertisers are not looking just to run advertising anymore," said Kristine Welker, chief revenue officer for Hearst Digital Media. "They are looking for opportunities to bring brands to life."
While websites can choose to try to sell advertisers on any size ad that they want, the AOL unit is one of six new larger, interactive formats that the Internet-ad industry's trade group is in the midst of standardizing to get marketers to use it. Marketers like standard units they can use across hundreds of sites rather than formats that have to be custom made for a particular site. Google Inc. and Microsoft Corp. also have recently developed larger units that the industry is standardizing. Their ads also are larger than standard online ads and also include room for interactive elements, such as videos or games.
AOL advertising executives say expanding the size of the audience that sees the ads could spur marketers to shift ad dollars from traditional media, like TV and print, to digital. "Why hasn't the spend caught up? There hasn't been a format that has allowed advertisers to keep up," says Jeff Levick, President of AOL advertising. "We see this as the accelerant."
AOL introduced its ad unit, dubbed Project Devil, last fall, betting that the new ads would better grab consumers' attention and hold it longer. It has sold such ads to brands like Verizon Wireless and Procter & Gamble Co.'s Duracell batteries and run them on sites StyleList, Moviefone and AOL Travel.
But major advertisers have refrained from buying the ads because they can't run them elsewhere. "Advertisers don't want to build the Devil unit and then only be able to deploy it on AOL. They like the concept, but want to be able to have one "Devil"-like unit that can be deployed across a variety of sites," says Ben Schachter, an analyst with Macquarie Securities.
For AOL -- which is struggling to transform itself into an ad-supported media company and leave behind the old subscription-based "you've got mail" days -- much is riding on the new ad size. AOL chief executive Tim Armstrong regularly evangelizes them during calls with investors and at industry conferences.
AOL says consumers spend an average of 47 seconds more time with the new ad formats than standard ads and play 24 seconds more video. AOL charges up to about $50 per thousand views for the ads, ad buyers say. Standard display ads, which feature graphics and text and appear alongside the border of a website, have long had low click rates and typically cost a fraction of that.
AOL's share of the display advertising market has dwindled. Its display ad revenue fell 8% to $473 million in 2010 as the rest of the market increased 17% to $8.9 billion, according to research firm eMarketer Inc.
(Source: The Wall Street Journal, 05/04/11)