Banner ad: Happy birthday or not?

The banner ad turns 5 years old today, though some say it's no cause for celebration. But don't bury the banner ad just yet -- it's reinventing itself and mounting a comeback.

On Oct. 27, 1994, visitors to the HotWired Web site were treated to the first-ever viewing of a banner ad, the Internet's pioneering attempt at making money through advertising.

Five years later, many critics are saying the banner ad is dead ... almost.

"The banner ad will become richer," explained analyst Rob Enderle, vice president of Giga Information Group. "It's not dead, per se, but it's going to have to change quite a bit."

New buzzword: 'Rich media'
Like a phoenix rising from the ashes, the much-maligned banner ad is reinventing itself, and in the process helping to create a new Internet buzzword -- "rich media."

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Banner ads: Web noise or demographic dream?

Rich-media advertisements still generally occupy the familiar space at the top and bottom of Web sites, but unlike traditional banner ads, this new breed of advertising uses additional features such as audio and video, pop-up surveys, and even the ability to complete e-commerce transactions.

Jupiter Communications estimates that by 2002, one-third of the predicted $7.7 billion in online advertising market will be spent on rich media.

Already, Lyn Oakes, chief operating officer for online advertising pioneer Flycast Communications, estimates that 40 percent of the ad impressions it serves are rich-media enabled.

"It (rich-media advertising) is really growing," Oakes said. "We think there's a tremendous growth opportunity here."

No broadband ... yet
The key to rich-media ads is low bandwidth. Most ads are Java-enabled, do not require a plug-in, and are 5KB or less.

With Jupiter and other research firms estimating that 77 percent of Internet users in 2003 will still be using dial-up Net access, broadband advertising is a long way off.

"Broadband is our nirvana," explained Annette Tonti, president of online advertising firm BlueStreak. "But right now, the most important thing is that your advertisement doesn't slow down the site. If it's too big, the ad won't even get loaded and nobody will see it."

"It's going to be a while before you see commercials on your computer," agreed Jupiter analyst Marissa Gluck.

In the meantime, many advertisers are going back to more traditional formats, such as direct marketing through e-mail. It's part of another trend in online advertising -- personalization.

Personalization push
"The Internet provides lots of opportunity for customization and interaction," Enderle said. "We're going to see a lot of user profiling, and using that information to drive ads that buyers would be interested in."

Enderle predicts that eventually, user profiles will travel with a Web surfer, allowing sites to serve personalized advertising regardless of where they surf.

The combination of attention-getting rich media with personalized delivery is the current holy mantra of Internet advertising.

With trillions of traditional banner ads still decorating most sites, the days of measuring success simply by how many people click on an ad are over, according to Jupiter's Gluck.

Now, success is measured by the revenue generated as opposed to the cost per acquired customer.

Results needed
A new study conducted by The Boston Consulting Group shows online companies spend an average of $42 per customer for their advertising and marketing efforts. For that kind of money, companies want results.

"It has to end in a buy someplace, said Enderle. "There has to be revenue somewhere, otherwise you don't pay your advertising bill. This will be a case where there are instant rewards for people who get creative."

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