Here’s a snappy lede from a recent Silicon Alley Insider post, AOL Q4 Ads Plummet:

Emphasize third-party ad networks at the expense of high-margin premium ad sales…it seemed like such a good idea at the time (to the architects of the network strategy that AOL launched last year, which has since bombed.)

We’ve thought a lot about this issue since the inception of FM in 2005, and we’ve come to some very clear conclusions of late. The gist? See below.
- ChasNote – Fred Wilson: Why Premium Display Instead of Cheap Graphical Ads?
- Chasnote: Display Advertising v. Graphical Ads
- And in particular, this recent post from John Battelle. He writes:

FM does in fact sell display advertising – a lot of it. But that’s not all we do. The CM business model is not simple, and it’s not always easy to explain. But the connection between display and CM is direct: we work with brands to create media executions that are truly valuable (like WePC, MomSpeak, American Express Open Forum, or Toshiba’s Laptop Experts), and we then use display to distribute, amplify, and announce those executions.
We do a lot of innovative things inside that display real estate – like RSS feeds, widgets, video, even chat. Yet we also sell a lot of straight display ads, just like any other major publisher. However, it’s our belief that a business that sells only display advertising, particularly in a down economy, is heading for a commodity game. That’s why we reorganized – focusing on our unique ability to deliver results well beyond the banner.
We know that display advertising works. But it’s clear that the real estate any website gives to display has to deliver value to both the audience and the advertiser. As I’ve argued before, algorithms don’t replace community. There are hundreds of companies competing to deliver that value through behavioral and contextual algorithms, and we work with those we consider to be the best. Combined with CM, display becomes more than just ads adjacent to content, it becomes an invitation to a value exchange between marketer, publisher, and audience. In the coming weeks, expect more from us on these issues. It’s an exciting time to be in the media business, to be sure.