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For the three or four of you who have been reading this blog for the last three years, I’m sure you’ll fondly recall an early post I wrote about the possibility of Google running banner ads on their site. At that time, I wrote:

At the end of the day, Google needs to serve ads that generate the highest click through rate possible. This not only increases their revenue per visitor, but it is also a great benchmark to determine whether their users consider the ads on page to be a positive part of the user experience. If text ad click through rates decrease to the level of banner ads, it is pretty clear that users will have concluded that be it a banner ad or a text ad, it is so annoying it is not worth even acknowledging.

Today I noticed for the first time that Google had added a drop-down window that shows products related to an etailer’s search ad. I’m guessing that since I have never seen this as an option in my account, and that only a few of the very top retailers seem to be running this, that this is yet another beta. Here’s what it looks like when you do a search for “engagement rings”:

Now I know that this isn’t really a banner – there’s no animation, headline, or call to action – but this is certainly a long way from the “text only” ads that initially distinguished Google from all other Web sites. And when you add in the giant Google Checkout logos to the mix, Google’s ads are becoming more and more graphical by the day.

Frankly, I support the theory Google uses on their content network – let banners, video, and text ads all compete for the same space – the placement with the highest CPM for Google wins. Maybe this is a baby step in that direction.