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For most of the history of Internet advertising, display advertising has been dominated by two types of advertisers: brands and highly sophisticated lead gen companies (just think about how many LowerMyBills banner ads you’ve seen in your lifetime). That is beginning to change, primarily due to the rise of ad exchanges and DSPs (demand side platforms). Over the last few years, Google acquired the DoubleClick Ad Exchange and Yahoo acquired Right Media. Both of these are essentially marketplaces where publishers can place unsold inventory and advertisers can bid on this inventory.

    The problem with ad exchanges historically has been the complexity and cost of participating in them. Unless you had years of experience with display media buying and perhaps a few good engineers to build a “real time bidding” or RTB algorithm, you could quickly waste a lot of money on an ad exchange (or more likely, you just wouldn’t participate in the first place).

    Enter the DSP. DSPs are basically agencies that help non-savvy advertisers participate in ad exchanges. They can do everything from bidding, tracking, optimizing and even designing ad creative in some instances. DSPs remove the knowledge barrier to entry and also reduce the minimum investment to get involved in exchanges (some will take clients who want to spend just a couple thousand dollars).

    So does this mean you should immediately take 20% of your online marketing budget and throw it toward display advertising? Probably not; at least not yet. Display advertising is still a top of the funnel, demand creation medium. That means that the direct ROI from display buys will almost always be much lower than your paid search investment. Moreover, unless you can set up proper attribution to determine how display influences future purchase behavior, you really can’t determine the true ROI of a display campaign.

    There are, however, some trends in display advertising that will soon make display much more viable for all advertisers. First, in the near future (perhaps late 2011) we will start to see self-service platforms through which you can interact with ad exchanges. This will further reduce the cost of advertising on display, and it will likely evolve into an AdWords-like system, where you can target specific inventory and bid to your own CPA metrics. Second, automated display ad builders are improving, which will enable you to create decent ads without paying a designer or DSP to do it for you. Google has been working on their display ad builder for several years and it is improving rapidly.

    The one trend in display that you can – and should – take advantage of in 2011 is retargeting (or, in the parlance of AdWords, remarketing). Retargeting allows you to serve up an ad to a person who visited your site but did not convert. For example, if you are selling widgets and someone adds some widgets to your online shopping cart and then leaves before completing their purchase, you can actually serve up an ad that says something like “Come Back and Complete Your Order and Save 20%!”. While some consumers find this a little creepy, the data definitely suggests that retargeting increases your conversion rates (plus, you can combat the creepiness factor by reducing the frequency in which you serve ads to an individual, as well as potentially reducing the personalization of the ad).

    Retargeting opportunities abound. You can do retargeting through AdWords (your account rep can set that up for you, though it does require a little extra code on your site); you can use DSPs to do retargeting for you; and you can also work with retargeting specialists like Retargeter and FetchBack.