• by Bill McCloskey , June 13, 2002

It is a surprise to no one that the veneer of Internet advertising has developed some cracks. But what most people don’t realize yet is that those cracks are widening into a divide that will determine the future of online publishing. I call it the Rich Media Divide. Let’s face it: size matters. The traditional static 468x60 banner is just too small and limited a canvas to hang compelling marketing messages from.

A recent study conducted by Eyetracking.com for CNET Networks found that CNET’s new 360x300 Macromedia Flash-based “Messaging Plus” units were viewed up to 8 times longer, that brand recall was over 3 times as great, and that users liked the units twice as much as standard banners. Bettina Fischman, CNET’s VP/Crusader, announced at a recent conference that the new ad units were already sold out 3 months in advance. And rumor has it these units are selling for substantially over the average CPM rate.

But there is a dark side to all this success. Companies whose business model benefited from economies of scale that a single static ad unit standard afforded—ad networks and site aggregators—are now walking around with a millstone around their necks that may end up sinking them.

In order to take advantage of these larger interactive units, sites need to redesign and recode their pages. For sites like CNET that control their own ad serving and have the resources (and the will) to undergo such a massive site redesign, this is an expensive but doable procedure.

But for site aggregators—companies that own dozens of smaller sites in various vertical markets—the problem is much more complex. How does one begin to undertake the recoding of over 100 different sites, each with its own look and feel?

For ad networks, the issue is even worse and as pure an example of a classic chicken-and-egg problem that you will ever find. Ad networks can’t sell larger ad unit inventory, because the sites in their network are not able to accept them. And yet the sites, which depend on the network for ad revenue, can’t redesign their pages, because there are no ads being sold in which to fill those big holes. They are trapped within a 468x60 static banner ghetto. And as CPM rates decline for static banners and increase for large rich media ad units, the divide grows deeper and wider. Recently, I got into a discussion with one media maven who predicted that an average CPM of $2 is the future for static banners. His idea was that this solves all the Internet’s problems: larger media budgets will be allotted for online, more inventory would be sold, more money for everyone.

Unfortunately, this notion does not look at the limits of online traffic. Lowering CPM rates is not the answer. Creating more value is. The near-term future is clear: Those publishers who are embracing the benefits of rich media today may find themselves the only ones still standing once the smoke clears. In the meantime, businesses that rely on traditional banners will need to be creative and move quickly to develop ways to deploy rich media immediately—before it is too late.

Emerging Interest founder and CEO Bill McCloskey can be reached at bill@emerginginterest.com. For example, a well-known site aggregator specializing in IT professionals recently posted a $1 million quarterly loss on revenue of $12 million. In order to achieve that same $12 million in revenue, selling inventory at a $2 CPM, they would have to generate 6 billion ad impressions per quarter, or 100 impressions for every man, woman, and child on the worldwide Internet! And they would still be losing $4 million a year.