Even before the dot-com implosion left online publishers desperate for ad dollars, advertising on the Web was becoming a difficult sell. The early promise of the medium seemed to wither on the vine as click-through rates plummeted to a dismal average of between 0.3 percent and 0.5 percent. Now, with the recent economic downturn stretching ad budgets thin, online ad space has become a buyer's market, and many publishers find themselves having to accept unfavorable cost-per-action (CPA) deals, as opposed to the more traditional cost-per-thousand-impressions (CPM) arrangements, in order to survive.

In response to that pressure, the ad industry began trotting out figures showing that Internet advertising works as well--and in much the same way--as advertisements in traditional media such as print, radio, and television. New studies suggest that online ads not only promote direct response (namely, click-throughs) but also brand awareness. A report commissioned by the Interactive Advertising Bureau (IAB), for example, showed that consumers' immediate brand recognition was increased by exposure to banner ads by a factor of 2 to 7 percent. A Morgan Stanley report released in February put the figures even higher. DoubleClick and MSN released studies with similar results.

Taken together, the upshot of the data was clear: banners work even when consumers don't click them. Furthermore, the effectiveness of ads was greatly impacted by such elements as size and format. Not surprisingly, large banners proved more effective than smaller ones, and dynamic ads, such as those using Flash animations, outperformed their static counterparts.

Following those findings, more effective online ad models have gained acceptance over the past year even as innovative firms design ever more radical forms of placement. While browser add-ons such as Gator and eZula further complicate the market, ad sellers must both prove the worth of their ad products and gauge what level of invasiveness and distraction users are willing to tolerate. We will review the principal new approaches and their relative effectiveness.

Ads are a lot like fishing lures, flashy hooks tossed into a sea of consumers. Until recently, however, the tackle selection available to online ad designers was sorely limited, and the fish, as it were, had learned to stop biting.

Today, banner ads still make up roughly half of Internet ad sales, the vast majority of those being the diminutive and familiar 468x60-pixel rectangles into which companies have long been obliged to cram their messages. The industry is evolving, however, and in the current market, publishers have had to give up real estate in order to entice more advertisers online. Suddenly, large 250x250 square banners are running smack in the middle of Web pages or running down the side of the browser window like newspaper columns.

In February, the IAB released specifications for seven new ad formats that it hopes will be adopted as industry standards. One of the most popular of these is the so-called wide skyscraper, a 160x600 spire that rises up the right-hand side of browser windows, consuming more than three times as much page space as standard banners.

Not surprisingly, studies show that skyscrapers are more effective than traditional banners in terms of both branding and click-through rates. Teen network Snowball.com, for example, announced an 18 to 36 percent improvement in click-through rates using skyscrapers. Skeptics will point out that it's a 36 percent increase over next to nothing, but still, that's a move in the right direction. While some of that impact is doubtless the novelty of the format, smart media buyers will take advantage of it before the shine wears off and returns start to diminish.

Rich media, poor media
In addition to size concessions, publishers have made bandwidth compromises as well, allowing designers a greater degree of freedom. Where typical banner ads were generally restricted to a maximum download of 10K, skyscrapers may range up to 25K. With the added memory comes the ability to create more dynamic ads and experiment with so-called rich media.

In brief, the term rich media refers to any ads featuring multimedia enhancements: animation, sound, or even streaming video. Another less-than-startling conclusion of the recent studies held that ads that flash, twitch, or otherwise bust a move are more liable to attract users. According to findings by DoubleClick, such ads had a 71 percent higher impact than their static counterparts.

Not that animated banners are new; GIF89 has been a part of the repertoire for years. But the latest rich-media campaigns go far beyond the normally jerky graphical interchanges to deliver seamless animation and greater depth of content.

For example, a Volvo ad executed by the rich-media company Enliven features an opening Flash animation in which a safety pin morphs into the shape of a car. When a user, thus lured, mouses over a set of tabs in the banner, the ad expands into a large pop-up window that provides considerable detail on options such as financing and safety features. No click-through is involved; rather, it's as if the Volvo Web site (or a significant part of it) were brought to the user by way of the Flash Player.

Macromedia Flash has quickly emerged as the dominant technology in the rich-media game for various reasons. For one thing, it offers good reach. The Flash Player comes preloaded on most new browsers, and Macromedia claims that 98.3 percent of all computers--some 414 million users--have the plug-in installed. What's more, Flash uses vector-based graphics to keep downloads palatable, streaming allows ads to begin playing before they're fully loaded, and Flash ads can incorporate sound and interactive components such as mouse-overs.

What about the 1.7 percent of machines that don't have the player? Most respected sites require developers to deploy sniffer code to detect the plug-in or lack thereof. If the player isn't installed, the ad server will simply default to a static banner or GIF that's animated by frames of the designer's choosing. This way, the user still sees an ad (albeit a less engaging one), and the page loads fully.

Flash is by no means the only player in the game, however. San Fransisco-based ad agency Freestyle Interactive recently garnered three Clio Awards for its Hewlett-Packard Invent campaign. Using Java to power some elegantly simple yet standard 468x60 ads, Freestyle's designers invited users to manipulate elements within the banner. In one example, users can change the numbers in a mathematical equation and watch the effect those variables have on the color, frequency, and wavelength of the undulating graphic in the background.

The message behind the ad is admittedly subtle and provides scant motivation to click--the click-through rate for the campaign's 12-month run was only 0.4 percent. But according to Freestyle's case study, the effort was primarily concerned with branding. By that measure, or at least judging by the mesmerizing effect of the ad, it worked.

The jury is still out as to whether the seemingly ubiquitous X10 ads have worked or not. Surely you've seen them. They're the surveillance camera ads that, unbeknownst to you, load beneath your browser window (thus called pop-unders). The pop-under ads lay in wait while you continue surfing. Then, just when you thought you were done--voilà--you're hit with the pitch.

It's a clever enough strategy, and by some standards, it has been spectacularly successful. After all, the campaign has enjoyed incredible reach. According to Jupiter Media Metrix, the X10 ad, which runs on such prominent sites as the New York Times, gets served to a full one-third of global users. On the other hand, two-thirds of those users close the ad window within 20 seconds.

But what makes the X10 ad news- and debate-worthy is the groundswell of ire it has aroused. On Web logs and around watercoolers everywhere, people are denouncing X10 with the kind of vitriol usually reserved for unfaithful mates or meddlesome in-laws. On X10's own site, the company defends itself by insisting that the ads are in fact legal. In a further effort to appease the angry hordes, it even allows you to opt out of receiving the ads, although only for a month.

As such, the X10 campaign would appear to have backfired. Even if the ad is successful in moving the merchandise, most marketing specialists agree that the company hasn't done itself any favors in terms of branding. One may ask, however, if the backlash has as at least as much to do with the winking juxtaposition of a pretty girl and a spy camera as it does with the technology. The voyeuristic insinuation, combined with the fact that the user generally has no idea where the ad came from, is probably enough to make most folks resentful.

But, in the end, isn't there something to be said in defense of pop-unders as an ad format? After all, they're less obtrusive than ordinary interstitials, ads that brazenly insert themselves in the foreground, creating a barrier between the user and his or her destination. X10 may have given pop-unders and the company itself a bad name, but at least it didn't interrupt you to do it.

A proprietary technology from New York City-based Unicast, superstitials are television-like ads that play in pop-up windows of up to 550x480 pixels and can run 20 seconds in length. Like other pop-ups, superstitial ads spawn a new browser window and support standard Web display formats including HTML, GIF, JPEG, and Macromedia Flash.

What makes superstitials different from other interstitials is their delivery, which Unicast calls "polite downloads," meaning that the ad loads in the background and does so only when the user's connection is free--that is, when it's not loading other pages. Unlike typical JavaScript-launched pop-ups, superstitials precache so that the user sees the ad only when it is ready to play. At that point, however, the ads are a little less polite, becoming every bit as intrusive as, well, TV commercials.

But according to a Harris Interactive study commissioned by Unicast, these superstitials work nearly as well as TV commercials, comparing favorably to television spots in traditional metrics such as brand recall and purchase intent. Superstitials, which also provide back-end performance tracking, have performed exceedingly well in terms of click-through, too. One ad in particular, a Mother's Day spot for Macy's that played a short Flash program before allowing users to mouse over a selection of gift ideas, had a click-through rate of 19 percent.

For the moment, the use of the Unicast technology may be limited by expense and reach considerations (while gaining ground, the platform is not yet supported by all sites or ad networks), but for the companies that can afford them, superstitials have already caught on. Among its clients, Unicast counts such heavy-hitters as Warner Brothers, Absolut Vodka, Panasonic, and Volkswagen.

Advertising outside the box
Another in-your-face ad format that has so far had less exposure is out-of-banner advertising from a company called Eyeblaster. Like superstitials, Eyeblasters are preloaded and support standard Web formats including Dynamic HTML, Flash animation, and audio files. Like pop-ups, the ads play atop the browser window that the user is viewing. The difference is that instead of using a separate window, the animations and images in an Eyeblaster ad float on a transparent layer overlaid against the Web page. The results vary, and the featured ads change from month to month, but the effect is impossible to ignore.

In one ad for Coca-Cola, a 12-pack materializes on the screen, and a Coke is poured into a tall glass. Once the ad has piqued your thirst, the apparition vanishes altogether, and you're back to your Web page. In another ad for Zippo, the browser window slowly dims, only to be illuminated by--you guessed it--a Zippo lighter.

Eyeblaster touts the simplicity with which its ads can be created, the ease with which sites can be Eyeblaster-enabled, and the lack of difficulty tracking performance data. But the company neglects to mention how annoying the ads can be and the problems users have in turning them off. Because there's no browser window to close, you have no choice but to quit the application or suffer the distraction. Admittedly, the ads are short, running in a matter of seconds. But they are probably the most distracting of any ad format currently on the Internet. Advertisers--at least those hell-bent on ad impressions--may love them. But such ads may drive users to consider the merits of ad-blocking software in the long run.

Same as it ever was
Such radical approaches emphasize the challenge that has existed all along: how do you attract the most customers and annoy the fewest? One might well argue that technology is only a minor variable in that equation, that more depends on the creative aspects of a particular ad campaign than the delivery. In truth, both factors come into play. Today, ad designers have a much richer palette to work with. This can only be good for the industry, providing publishers with more sales fodder and advertisers with a wider variety of ad options across a broader spectrum of price points. With sufficient skill and imagination, even users may perceive a benefit.