Fortune Brainstorm: Digital Advertising Following Eyeballs?

With the advertising industry feeling the crunch of the economic downturn and with more demands for accountability, there's no question that digital advertising is where money is going. But the online ad market still has a lot to figure out about what works and what doesn't, which is why the big morning session at Fortune's Brainstorm: Tech conference was called "The Eyes Have it: Advertising and Media Decision-making in the Digital Edge."

The panel included Lynda Claris, who runs AOL's Platform A ad business, Brian , from Microsoft'sad business and Tom Bedecarre, the head of AKQA, an entirely online ad network. All three agreed that with certain sectors -- like automakers and housing -- really hit hard, the challenge is growing demand for online ads outside those areas. And that requires better metrics and more compelling connections with consumers, while helping clarify to advertisers who are confused by too many choices and too few clear ways to figure out their return on investment.

The main takeaway: advertising on social media is the inevitable, next big thing, but advertisers are still scared of it. AOL's Claris says Platform A is introducing a content screen, using the same technology as a spam filter to evaluate content in social media so advertisers will feel more comfortable putting their brands next to content created by random people. Now that AOL owns social network Bebo they're particularly interested in engaging all those social networking users.

This idea of making advertisers more comfortable about social media through technology will allow brands to engage users more by partnering with just the right content. But it seems advertisers are going to need quite a bit of convincing to transition from a clear-cut prescriptive buy to giving up control, in the way they'll have to a bit no matter how good social media screening mechanisms are. Esther Dyson, now on the board of ad giant WPP suggested the importance of having a marketer become part of the community, the way a brand might create a profile on Facebook.

There was also some talk of the plethora of ad networks -- and the question of whether or not they've become commodities. Those engaged in the online ad space know exactly what I'm talking about, but for those outside the industry: it seems like every day another ad network or company helping companies place their ads online pops up. Microsoft's split these ad networks into two categories, one which has broad reach, aggregating audience and using scale and data to target customers.

says these take so much investment, there aren't many players who can really compete in this business over the long-term. The other variety, one which seems particularly popular these days, is a vertical ad network, one which focuses on financial companies, blog networks or Martha Stewart. The idea with these is that you trust the Martha Stewart brand and are willing to go a bit broader, but basically want to target just that demographic. says Microsoft wants to create a hybrid of those two types of ad networks. It has the scale, but it can also go narrow and deep into certain demographics.

So What about Google? The ad giant is certainly the elephant in the room. AKQA's Bedecarre said "I love Google," but said that they have the challenge of reaching out to marketers. He suggested that while they were successful once, they can't just assume that marketers will come back for their newest and latest products. Microsoft's was a bit more competitive, surprise surprise. He complimented Google on "creating a great mousetrap with search," but said that they're not as strong in such other places, such as display ads, where they're stronger.

laid out the two company's fundamental differences from his perspective -- saying "Microsoft has tremendous investments in mobile, PC and the web," and Google only has one of those (The web). He also said he thinks Microsoft is more advertisers and agency friendly, while Google isn't as much, more of a black box. Still, there was no question in the audience that Google is the 800-LB gorilla.

Questions? Comments?