• by Mark Walsh  @markfwal, November 19, 2010

A new report concludes that online display advertising looks solid based on an analysis of ad placements on the major Web portals' home pages. Among Yahoo, AOL, YouTube and MSN, the Microsoft property stood out as having the highest proportion of low-quality ads.

The report was issued by analyst Ben Schachter of Macquarie Capital by industry vertical, ad type (rich media, size), and ad objective (direct response or branding) from Oct. 1 to November 15.

Highlighting broader improvement in display advertising, it showed an increase in oversized and custom units on home pages and a continued uptick for auto advertisers.

Nearly a third (32%) of Yahoo's home page ads were oversized or custom ads, up from 12% in the third quarter. "Additionally, the relatively high percentage of quality financial services, autos, and media advertisers is encouraging. The fact that virtually 100% of Yahoo's home page ads were rich media is also a solid indicator," stated the report. Yahoo reported that display ad revenue increased 17% in the third quarter compared to the year-earlier period.

AOL, meanwhile, has benefited from cutting down the number of ads on its home page, leaving room for 36% to be the oversized, rich media kind favored by brand advertisers. Schachter added that AOL's effort to clean up its home page, dubbed Project Devil, has led to higher ad quality overall. But that hasn't translated into higher ad dollars yet for AOL, which saw display ad revenue in the third quarter fall 14% from a year ago.

YouTube also continues to make ad gains, with high-quality, engaging "masthead" buys almost every day, according to the report. Another positive sign is that YouTube's advertiser base is gradually diversifying -- 55% were media companies in the first half of the fourth quarter compared to 65% in the third quarter.

The news wasn't so good for MSN in that only 9% of its home page ads were in the oversized/custom category, which the report deemed a "negative indicator" for monetization. Furthermore, more than 45% of its ads were direct-response ads, and about the same percentage were non-rich media -- the lowest proportion of the four portals.

Yahoo's home page today, for instance, features an expandable video ad for the new "Harry Potter" movie, while MSN is running a standard banner ad for Toyota in the equivalent slot above the fold.

The Interactive Advertising Bureau reported this week that total online ad spending in the third quarter hit $6.4 billion -- up 17% from a year ago, and roughly on par with the prior two quarters. Display ad dollars were not broken out for the third quarter, but spending in the category reached $4.4 billion in the first half of 2010, up 16% from a year ago.