Can Search’s ‘Beautiful System’ Extend to Display?

NEW YORK If there’s been a “killer app” of Web advertising to date, it’s search. Targeting is near perfect, thanks to consumers directly expressing their intent. The auction system has proven an incredibly efficient way to match supply and demand. The low barrier to entry has exploded the marketplace to include hundreds of thousands of small businesses.

Unsurprisingly, many want to extend this “beautiful system,” as former Yahoo! CEO Terry Semel once called it, to other forms of advertising, beginning with display placements. The idea is that the Internet’s much-maligned banners will become more targeted and valuable if the marketplace is flooded with display ad placements that match consumer interests.

The devil, as always, is in the detail. The main obstacle to this vision is creative. Search scales because its creative requires only 140 words of ad copy. How can such a DIY system work with graphical ads?

Social networks, which have a surplus of extra ad inventory, are the most fertile ground for cracking this code. Facebook was the first to try this, rolling out a do-it-yourself ad platform that lets advertisers of any size run graphical ads on its site targeted to user location and interests. Now rival MySpace is getting in the game.

This week, the News Corp. property is rolling out its MyAds self-service banner ad system. It hopes to attract tens of thousands of organizations and small businesses to create their own display ads that will be matched to user interests and placed through a Google-like auction system. The bet is such placements, using “hyper-targeting” criteria that mines personal profile data, will make the 56 billion banners displayed by MySpace each month more valuable.

“We think the sky’s the limit on this,” said Jeff Berman, president of sales and marketing at MySpace. “No one has done this kind of self-service for display as well and simply as Google has done for text quite clearly. Part of it is making it really simple … and enabling users to leverage pre-produced templates or use their own.”

MySpace has tested the system with 3,000 advertisers, he said. Berman declined to give a target figure for the number of advertisers MySpace believes it can add to the system, but he allowed that a large number would be needed for an efficient system.

“It has a chance to significantly grow our base of advertisers,” he said.

Self-service ad platforms that are the hallmark of search have not caught on in display. Google has so far stayed out of DIY banners. Other big players have remained content to offer text ads to small advertisers and confine display ads to larger ones. Yahoo! and Microsoft both do not have self-service systems for display ads. (Advertisers can run display ads on their own through Yahoo!’s Right Media exchange.)

“There isn’t a reason that couldn’t happen to display, except that display is more involved,” said Greg Sterling, an industry analyst with Sterling Intelligence. “There’s layers of complexity for display that haven’t existed in the search marketplace.”

Berman said MySpace worked diligently to strip out as much complexity as possible. Advertisers will bid in an auction based on cost per click. MySpace has built a drag-and-drop tool with 64 templates for advertisers to create their own banner ad by adding in logos and copy. It is a “frictionless system,” he said.

Startup AdReady is building a system it hopes will do the same. It is helping publishers like The New York Times. MSNBC and others offer small advertisers the chance to create and run display ads through many networks. The display ad market needs to create more demand and tapping the long tail of the 20 million small and medium-size businesses is critical, according to AdReady CEO Aaron Finn.