Digital Media

A collection of nearly two dozen online publishers plan to offer advertisers at least one of three new display advertising formats beginning in July, the Online Publishers Association announced Tuesday.

The ad units are designed to be larger than banner ads, offer interactivity, and comprise a greater proportion of the advertising-to-editorial ratio that most publications operate under.

The move by online publishers comes at a time when the economy is in a recession and advertisers are pulling back on their spending.

"Agencies are looking for new ways to integrate their clients' brand experiences with more interactivity on the page, and these new units provide a way for them to accomplish this," said Pam Horan, association president, said in a statement.

The nearly two dozen online publishers represent approximately 66 percent of the U.S. Internet audience, according to the association. And they include FOXNews, NBC Universal, CBS Interactive (publisher of CNET News), ESPN, Time Inc., and The Wall Street Journal Digital Network.

The three advertising units include:

A pushdown ad that runs the width of a page but retracts to the top of the page, as well as offering a second ad on the right hand column.

(Credit: Online Publishers Association)

(Credit: Online Publishers Association)

A second ad unit, XXL Box, will feature page-turn functionality, as well as the ability to run video ads on the 468 wide x 648 tall size panel.

The fixed panel ad, 336 wide x 860 tall, remains stationary and users scroll up and down to view the ad.

Analyst firm eMarketer has reduced its estimate for online ad spending in 2008 to $23.6 billion from its August estimate of $24.9 billion, with this year's online ad growth rate of 11.3 percent dropping to 8.9 percent in 2009.

Looking on the bright side, eMarketer said in a statement, "It is important to note that the lowered estimate still represents an increase of 11.3 percent over 2007 spending." And eMarketer expects spending to reach $25.7 billion in 2009, $28.5 billion in 2010, and ultimately $42 billion in 2013.

But the rough news still jumps out. Hardest hit is spending on display ads, the graphical variety that typically are used to promote brands, for which the growth rate estimate was cut from 16.9 percent to 3.9 percent. "Display is suffering because many of the vertical industries--such as auto and retail--that are key players for the format are slashing their ad budgets," eMarketer said.

The other major variety, textual ads placed next to search results, is expected to grow at 21.4 percent in 2008, its lowest level so far. Next year the search-ad growth rate should be at 14.9 percent, the company predicted, dropping to 10.4 percent in 2013.

The search-ad growth rate is still larger than the overall market, though.

A number of Internet titans received an across-the-board stock target haircut on Thursday from UBS Securities analyst Ben Schachter, who said a weakening economic outlook is expected to take a toll on display advertising and, to a lesser degree, search advertising.

The reduced 12-month stock price targets for Google, Yahoo, eBay, and ValueClick, as well as a cautious outlook for the Web sector, come as the companies prepare to report their third-quarter financial results in the coming days and weeks.

Google's price target was cut back to $525 a share from $700; Yahoo was bumped down to $20 a share from $28; eBay was trimmed to $18 a share from $28, and ValueClick's target was reduced to $8 a share from $13.

Yahoo, Google, eBay, and ValueClick stock performance on Wednesday.

(Credit: Yahoo Finance)

Schachter, in his research note, gave his projections for the fourth quarter, which historically serves as the biggest quarter for consumer-related companies to advertise their products and services. And in sizing up the just-closed third quarter, Schachter blamed a weak September as a spoiler:

While the first two months of the quarter were decent, we believe that September was difficult. And while all our names will be impacted, we continue to believe that GOOG is relatively better positioned than the others.

GOOG, due to its exposure to highly measurable and accountable search advertising, likely held up better during the quarter, and we expect its 3Q results will likely be slightly below consensus expectations, including top-line (revenues) headwinds from a stronger U.S. dollar.

Our checks indicate that the display-advertising market during the quarter was soft, making us more cautious on 3Q results from YHOO and VCLK. eBay recently preannounced details of its 3Q results, with revenues at the low end of the prior guidance on weak consumer trends and FX (foreign exchange) headwinds.

Schachter added that he expects advertising budget cuts to fully kick in during the fourth quarter and through 2009, though he offered a silver lining to the dark economic-storm clouds:

While the macro environment will certainly impact ad spend both offline and online, we think that the continuing shift to online will be somewhat accelerated by the macro weakness.

Click here for ongoing coverage from CNET News, 'Tough times for tech'

HALF MOON BAY, Calif.--What's Google's next big revenue stream? Text ads remain the cash cow for the present, but the company's future includes a big role for display advertising.

"I think the opportunity for display is pretty large because people are shifting what we think of as offline budgets to online," said CEO Eric Schmidt at Fortune's Brainstorm Tech conference here.

"The reason I say it's the next logical one--customers who buy text ads are also busy buying display ads from other sources...So, it's a big space," said Schmidt. He made his comments during the course of an interview with Fortune moderator David Kirkpatrick.

Google CEO Eric Schmidt

(Credit: Elinor Mills/CNET News)

Schmidt's musings are not likely to come as any big surprise to Microsoft, but it suggests that the company will face new competition from a tough rival, sooner, rather than later.

During his brief time on stage, Schmidt offered a whirlwind round of comments about the industry and his company.

• You cannot run a company where you listen to the way Wall Street says you have to run the company.

• "We're not focused on stock price...We're focused on building a long-term institution and changing the world.

• One of the mistakes executives make is that they get bored with their core business. Our goal is to be a one-product company. It's called Google. Our idea is to have one seamless experience...and so you have to have a single brand.

• Many, many new forms of advertising are coming out. Maybe the most interesting is click-to-play ads...the testing and measurements is that people are doing it because they enjoy it.

• We select people who share our values...We don't value experience very much, which gets us into trouble sometimes.

• If you look at the history of software development, the interesting things get built by two people...There are essentially no counter examples. You could argue that maybe three is the right model. But there essentially are no examples of revolutionary products that began with 30-member teams.

• Our wireless initiative was the perfect outcome. It was the cost of a letter.