Folowing the 2.0 maxim that “everything is media,” online retailers have woken up to the media value of their website traffic and have started selling advertising on their sites (from WSJ, sub required):

Last week, Amazon.com Inc. quietly began testing the sale of display ads on its home page to companies such as Ford Motor Co. and Fidelity Investments. The move comes a month after Home Depot announced it was running ads on its site. Wal-Mart, meanwhile, is selling space on its main page promoting everything from Motorola cellphones to Kleenex tissues.

The retailers want to exploit their heavy traffic, which makes their pages prime real estate for marketers. But they are taking different approaches to their ad sales. Amazon will run ads from companies that don’t sell products on its site, such as Ford, while Home Depot Inc. and Wal-Mart Stores Inc. only take ads from their suppliers.

The moves come with relatively little risk, analysts said, as long as retailers find ways to incorporate the ads so as not to annoy shoppers. By taking ads from major vendors, retailers gain not only additional revenue, but they can also improve their chances of selling the manufacturers’ products.

The retailers are embracing Web advertising at a time when marketers are shifting more of their ad budgets to the Internet from newspapers, television and other media. U.S. sales of Internet advertising rose 30% to a record $12.5 billion last year, according to the Interactive Advertising Bureau, a trade group for marketers.

The challenge for Web retailers will be balancing the amount of advertising they run with maintaining sites that shoppers find easy to use. “I don’t think anyone wants their site to look like Nascar ads, because it really distracts from the shopping experience,” said Heather Dougherty, a retail analyst for Nielsen/NetRatings.

Here’s an example of a Delta Faucet ad running on Home Depot’s main plumbing category page:

This type of advertising is as intuitive as search advertising — target consumers when they have indicated an intention to shop, in this case by visiting an online retail site. It’s strange that it took this long and that everyone isn’t doing it yet.

Of course, this is still the same “interruptive” advertising model — just because I went to the Home Depot plumbing page, doesn’t mean I’m looking for faucets, although the chances that I might be interested in a new faucet are a whole lot greater than if I were just reading news online. At the deeper category levels and with site search, these ads can become more granular and targeted, like search keyword advertising.

The other problem with display advertising on retailer sites is that it’s unclear whether any value goes to the consumers, despite claims that the sites are sharing the economic benefit:

Amazon, which sells everything from books to lawnmowers, drew 37.6 million unique visitors in July, making it one of the 10 most popular Internet destinations, according to Nielsen. The Seattle-based company began testing ads on its site last week because the revenue “allows us to even further lower product prices for customers,” said a spokesman.

Amazon may very well use ad revenue to lower prices, but we have no way of knowing — there’s no transparency to the system — at least not for the consumer.

If consumers could actually see how this type of advertising on retail sites was effectively lowering their prices — and not just interrupting their shopping with unsolicited brand messages — that would be way cool.

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