Banner ads that aren't differentiated across a market are falling victim to slim margins and little branding impact. Find out how you can avoid this engagement trap as the industry moves in a new direction.

"Squishing" is the sound banners make when consumers ignore them, publishers realize slim margins and advertisers achieve little branding. Said technically, the squishing sound happens when banners are supplied without qualitative differentiation across a market.

Wikipedia doesn't supply a definition for "squishing," but it does define commodity. Commoditization occurs as goods or services markets lose differentiation across their supply base -- often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants have become commodities, such as generic pharmaceuticals and silicon chips and... banner ads.

Banners did not suddenly -- nor unexpectedly -- get squished. In fact, banner squishing is natural and healthy for the market. The focus here is on the why and how of banner squishing. The key to remember is this: Banners are not dead. Rather, publishers and advertisers are in search of advertisements -- regardless of the shape and size -- that provide qualitative differentiation.

In the late '90s, the Flycast Network pitched -- sometimes preached -- this formula: reach, response, results. The argument was simple: If you are paying $30 CPM on Netscape and $3 CPM on Flycast, then you should be getting 10 times the results on Netscape because you are paying 10 times as much for ROI. Are you? Arguably, banners would never be the same.

Bill Gross' Goto.com (which became Overture, which became Yahoo) took a page from Flycast's playbook and began placing search ads based on the auction model. Starship Google, of course, perfected the auction model, and it is still creating massive efficiencies in the banner auction model.

Now Rubicon Project, PubMatic, YieldBuild and Admeld are offering services and technology that essentially pick the highest paying ad from all the advertisements available and place that ad on the publisher website. Sounds attractive to a publisher, but the reality is, this process eliminates differentiation and treats your inventory the same as everybody else's inventory.

It also sounds attractive to an advertiser, but if you're a brand looking for engagement with your audience (as opposed to ROI), then to the consumer these banners are mere mile markers on the side of the road, blurring by on the information super highway.

Squishing is not going away, but it's not the future of brand advertising online either. The future of brand advertising is when publishers can engage their consumers in two-way communication involving a passion-point interest while wrapping the brand into and around that experience.

Win-win-win
A win-win relationship is ideal in any partnership, right? In this case, the goal is for a win-win-win relationship to develop between the consumer, publisher and advertiser. If squishing is inevitable in a marketplace, and considered healthy, then this knowledge should be used to build that winning relationship.

So, while publishers will continue to offer their squished banners, they should work to create advertising opportunities that wrap advertising messages into and around their content. Yahoo's My Yahoo tabs, for example, does this by integrating advertiser content with Yahoo content and external RSS content. 

Publishers such as portals, with control of large sources of proprietary inventory, have an easier time accomplishing this, thanks to their large quiver of goods and services. A former sales rep for Yahoo, now with Facebook, recently lamented that he missed Yahoo's bag of products and research; at Facebook, he essentially offers only three vanilla products.

However, Google is accelerating fragmentation of content and audience at a remarkable pace, resulting in the real growth opportunities for the mid- and long-tail publishers. For these smaller publishers to offer integrated advertising opportunities, they must turn to vertical media networks (such as Sportgenic, DogTime Media, Matter Network) or vertical service networks (Gamook, Meebo) to supply the capability.

Advertisers' media plans will continue to have the line items for ROI squished banners, but media planners and account managers will have to look for scalable opportunities where their messages can have qualitative differentiation. An entire thesis could be written on the tactics of achieving qualitative differentiation, but one way to start doing this is to look for opportunities where the ad becomes the content and is wrapped around a two-way communication or interaction. Additionally, the growth of vertical media networks will provide advertisers with a great channel for achieving two-way communication. In the end, consumers will benefit when publishers and advertisers create a win-win together and their experience becomes a rewarding interaction with that brand.

Trevor Wright is CEO of DogTime Media.