AOL’s Display Dollar Dwindle May Be Sign of Things to Come

platform-a_logoforblog.jpgAOL told investors yesterday during its earnings call that Tacoda and Quigo are now fully Integrated in Platform A and can be used across all of AOL and third party network inventory (read: Advertising.com).

Whether that integration will assist AOL’s Platform A in garnering more premium, guaranteed ad dollars is another thing. The company experienced a drop in display ad revenues of 14 percent in Q2 from Q2 2007. Apparently they sold more ad units, but at lower CPMs.

One thing Tacoda’s behavioral targeting system enables publishers to do is drive higher prices for non-premium inventory that is tougher to sell than premium placements. Oh, and Quigo offers text ads, not display.

In addition to “continued effects of the acquisition integration issues,” the company chalked up the display decline to “pullbacks in some ad categories,” including autos, financial services, telecom and travel. And then there’s that pesky economic downturn, too.

The firm expects its Platform A organizational changes to take a positive effect in the second half of the year. Still, you’ve got to wonder what this big split of their online access and ad/publishing businesses will do when it comes to maintaining order.

As for AOL’s paid search revenues, those rose 10% over Q2 2007.

Sure, forces such as internal re-orgs and external economic pressure are taking a toll on CPM-based display advertising. But the fact is advertisers are gravitating more and more towards performance based advertising. Not only are we hearing about display ad declines from other large online ad sellers like Yahoo, we’re seeing agencies beef up their own performance ad knowledge and services.

Case in point: Publicis Groupe’s acquisition of search marketing firm Performics today. The head of its “VivaKi Nerve Center” operation Curt Hecht told me brand clients are demanding performance-based offerings more and more. “Increasingly, they’re asking us to go into acquisition and response-based media,” he said.

Even when ad budgets are replenished, the shift away from CPM-based display to something more accountable (whatever form it takes – display, text, whatever) may just turn out to be permanent.

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