• by Laurie Sullivan  @lauriesullivan, March 24, 2009

HOLLYWOOD, Calif. -- Marketers are shifting from less measurable display and branding campaigns toward direct-response ads, search and performance-based advertising.

Imran Khan, who runs the global Internet research at JP Morgan Chase, provided an analysis of trends prompting these changes during the OMMA Global Hollywood Monday session, "The Flight to Search and Performance-based Media," led by Search Engine Land Guru Danny Sullivan.

Khan expects economic conditions will force the gap between advertising budgets and the amount of time that consumers spend online to close. Overall, roughly 8% of the total ad dollars in the U.S. is spent online, while many consumers spend about 30% of their time surfing the Web. "Historically, ecommerce drives online advertising," he said. "Roughly 4% of total retail sales in the U.S. are from ecommerce. Amazon's recent revenue results came in at about 8% during a time when consumer consumption was down."

Internet advertising is becoming performance-driven. About 85% of total ad dollars spent online in the U.K. is performance-driven, compared with 50% in the U.S., Khan said. It's growing much faster than display advertising, he said. The economic challenges will continue to force the industry to change.

Brand advertisers want to reach specific demographics, but they also want assurance on premium ad placements. The last thing a company wants to do is spend hundreds of thousands of dollars to create a campaign, only to have it target the wrong consumers.

"We are seeing a move toward performance advertising in this economic downturn, so in the past year we have been making investments in advertising technologies," said Tim Mayer, VP of search monetization and distribution at Yahoo.

While brands want more effective ways to reach consumers, efficient tools and processes to buy advertising online, they also want to work with fewer partners that can drive better return on investments.

Yahoo is focusing on performance-based advertising and search and display. Some of the tools include smart ads and the ability to directly input information in advertisements and change the message as needed, such as prices or locations in travel ads to make it more attractive to consumers.

The second application Yahoo has been working on centers on performance-based targeting by geography, demographics, and behavior. Yahoo's search and display services have also been getting a lift. A tool dubbed Search Retargeting leverages users' behavior in search. These ads allow brands to place advertisements at the top of the page, as well as add deep links, videos and brand logos, Mayer said.