May 25th, 2007

AOL Targets Premium Brand Advertisers By Running Fewer Ads

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AOL announced a strategy to increase ad revenue by reducing clutter in order to attract higher CPM ads, i.e. they’re going run fewer ads (via MediaPost):

The counterintuitive plan–presented Thursday by the company’s Chairman and CEO Randy Falco and Chief Operating Officer Ron Grant during a Goldman Sachs conference–is intended to make AOL a less cluttered and more inviting environment for users, and a more effective platform for advertisers.

Grant described it as the “uncluttering of the AOL environment.” And while the inspiration for the initiative was putting the consumer first, Grant insists it also has a positive impact on advertisers.

“Our ads are delivering better value for our advertisers,” he said.

AOL is betting that they’ll net more revenue by charging a higher CPM across a smaller inventory — it’s simple algebra. Here’s an example of the type of ads that AOL is aiming to replace:

aol-money-finance.jpg

It’s a good bet that LowerMyBills.com and free credit reports are not high CPM ads. What AOL wants — along with Google, Yahoo, and Microsoft — is the premium brand advertising that is still spending the lion’s share of ad dollars in print and TV. To get premium dollars, you have to create the perception of a premium context, and nothing hinders that perception like clutter.

The reality is that the market for brand advertising is still very “squishy,” it’s more about perceptions and relationships than hard ROI. That’s one reason why Google has struggled with brand advertising and had to buy DoubleClick to acquire the relationships with media buying agencies that control brand advertising dollars — and why Yahoo and Microsoft followed suit.

Brand advertising will be a big driver of growth for online advertising, and the challenge for online media companies is to optimize ad sales in the fuzzy middle between online-native direct response and offline-native brand advertising.

Comments (2 Responses so far)

  1. AOL Targets Premium Brand Advertisers By Running Fewer Ads

  2. AOL Targets Premium Brand Advertisers By Running Fewer Ads

  3. That’s a step in the right direction. However, a very involved, higher quality media experience says nothing about the resulting effectiveness of the advertisement. Starch Advertising Research found that various online media outlets even show an inverse relationship between engagement with an online publication and engagement with the ads that surround it. Said Philip Sawyer, senior VP: “The more involved people are with the content the angrier they will be about ads that distract them from the task at hand.”

    If interested, more on POV here: http://www.attentionmax.com/blog/2007/05/the_assumption_that_people_who_love_their_media_are_going_engage_with_the_ads_is_incorrect.php

  4. Max,

    This isn’t about advertising effectiveness. This is about the PERCEPTION of premium context. Brand advertising sales is still a lot of smoke and mirrors, i.e. more a function of everybody feeling good about than being able to prove it works.

    That said, when the rubber does start to meet the road on brand advertising ROI — and it will — then your point will be critically important.

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