The features fall into five categories, including "Live," which uses real-time RSS feeds to continually update ads; "Local," which delivers zip code-specific messaging; "Rich," which lets advertisers deploy and track multi-video ads; "Shop," which turns banner ads into shopping browsers and "Viral," which allows consumers to share and embed the ads they see.

"There are a lot of things that can be done in the market that take advantage of Web 2.0," said Troy Young, chief marketing officer at the San Francisco-based VideoEgg. "We need to replace the banner with portable media experiences that leverage the power of video, feeds, maps and localization."

Launched in February, AdFrames is based on a new pricing system that charges marketers only when users initiate an ad and watch it for a brief time. Previously, the company sold ads on a cost-per-thousand impression basis.

Microsoft was one of the first clients to test the new ad system with ads for Office in a four-minute video featuring comedian Amy Sedaris. VideoEgg is charging advertisers up to $1-per-interaction for the new format, though Microsoft was initially paying less than 50 cents.

Young said at the time that between .5% and 9% of users mouse over and interact with the ads, which would mean that the cost-per-thousand impressions could theoretically reach $90. Previously, VideoEgg charged CPMs of around $10.

Given the potential for extremely high CPMs, it was not clear whether marketers would embrace VideoEgg's new model. However, more than 50 top brands including Hershey's, Fox, Adidas, Nike, Comcast, Disney, GM, Mazda and Microsoft have now advertised across the VideoEgg network for guaranteed engagement.

Brands including Sprint and Puma are now using VideoEgg's network to connect users with brand content and encourage sharing across many social environments, such as Facebook, MySpace and Digg.

According to Young, many budgets for 2- to 6-week campaigns are beginning to exceed $100,000. "At first we saw a lot of $10,000 to $25,000 budgets," he said. "Over a $100K is sort of a magic number for us, which we're starting to hit more often."

VideoEgg's network is now made up of more than 50 million unique visitors across roughly 200 video, gaming and social network sites as well as social applications. Founded in 2005, VideoEgg is largely credited with popularizing interactive ad overlays online video content.

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