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Microsoft Move Likely to Be Death Knell to Pop-Up Advertising Format

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The ads -- including pop-unders -- have aggravated readers of online news sites for years, but the tide is shifting as the next release of Internet Explorer will have a built-in blocker. Experts predict that will be the end of them, and publishers are preparing to shift to rich media ad sales.

For online publishers, the pop-up advertisement has been like an obnoxious rich uncle. Its success rate -- 13 times more effective than banner ads -- has generated a steady source of income for publishers, but it's also been a steady annoyance for readers who feel like someone's opening up browser windows without their approval.

Now the rich uncle is starting to wear out his welcome, and the time has come for publishers to start thinking about cutting him loose. Microsoft is prepping a pop-up blocker in its next version of its dominant Internet Explorer browser, due out by next June, giving more readers than ever the tools to take control of their online content experience.

While advertisers such as Orbitz have built businesses thanks to pop-up barrages, service providers such as EarthLink, AOL and MSN -- plus toolbars from Google and Yahoo -- have touted their pop-up blockers. But even with those offerings, Jupiter estimates that only 20 percent of surfers use them.

When word spread that Microsoft would include a blocker in IE, newspapers started writing the obituary for pop-ups. The only question remaining was how Microsoft would implement the blocker: If it defaulted to "off," then users might not figure out how to use it. If it defaulted to "on," then it was R.I.P. for pop-ups.

Karen Redetzki, MSN product manager, confirmed that the company was "considering a pop-up blocker" in the next version of IE, but she wouldn't give any specifics about the feature. But Windows expert Paul Thurrott told me he had seen the new blocker and explained how readers would encounter it. "The way it works is when the first pop-up tries to appear, you get a message noting the feature and asking you whether you'd like to turn it on," Thurrott told me via e-mail. "The default choice is 'yes.' "

Thurrott, who writes a regular column for Windows & .Net magazine, believes that this new version of IE will likely become the most widely used browser by the end of 2004. That means publishers are going to have a lot less people seeing pop-ups and pop-unders, and they will have to push advertisers toward other ad formats such as rich media.

Thinking outside of the pop-up

IE's blocker puts Microsoft in an interesting position: The software giant provides the technology to block these advertisements, while it also sells pop-under advertisements on its MSN network of sites (which includes Slate). Cyrus Krohn, Slate's publisher, told me that the MSN network recently decided to stop sales of pop-up ads, while still allowing pop-unders.

Pop-up ads run on top of the open browsing window, while pop-unders run below them in a more stealthy manner. Most blockers block both pop-ups and pop-unders.

Krohn welcomed the move, saying that pop-ups accounted for only 2 percent of all Slate ad revenues in the fiscal year ending June 30, 2003, and pop-unders about 2.5 percent of ad revenues. "We took a short-term revenue hit but it's a better experience for the reader, and less intrusive," Krohn said. "I'm reading a lot of press about publishers discontinuing pop-ups, so it may be the perfect storm where the industry decides to discontinue something right around the same time [Microsoft is] implementing this tool."

Other publishers reacted in similar ways. Forbes.com, CBS MarketWatch, NYTimes.com and others limit the number of pop-up ads that viewers see per session. "The revenue generated by this type of advertising is in the single digits in terms of percentage of total ad revenue," Jason Krebs, vice president of sales and marketing at NYTimes.com, told me via e-mail. "The revenue these units generate for NYTimes.com will be easily replaced by other ad units and packages that we offer. And the increasing availability and adoption of blockers will stimulate creative minds in the ad community to find quality ways to reach an audience."

Larry Kramer, chairman and CEO of MarketWatch.com, takes a fatalistic view of pop-up ads, given consumer angst and the proliferation of blockers. He told me via e-mail that it's only a matter of time before pop-ups will be going away. But one side effect of the blockers is that CBS MarketWatch will have to reformat some of its editorial content and promotions that are delivered via pop-up windows.

"We are going forward with the assumption that pop-ups go away as a revenue source," Kramer said. "It will require us to change some of the ways we promote our own products and conduct surveys of our site users. And as a Web consumer, I will be happy. But on the negative side, it could hurt our readers' use of some editorial features we offer, like our stock tracker."

All quiet on the Orbitz front

As pop-ups become an endangered online ad species, it behooves advertisers to start thinking differently. However, Nielsen//NetRatings found that the pop-up and pop-under formats actually increased in the third quarter to 7.4 percent of all online ads, up from 3 percent in the second quarter -- thanks to Orbitz pop-unders.

Orbitz spokeswoman Terri Shank noted that the online discount travel company has filed for an initial public offering and couldn't talk about particulars in advertising formats.

"We do pop-unders, which are a part of our total marketing mix," she said. "We check our return on investment every day, but I can't speculate on what's going to happen in the future. Orbitz is able to react very quickly to the market. Pop-unders are effective, or we wouldn't use them."

But others weren't afraid to look into the crystal ball to see the demise of the pop-up and pop-under ads. Steve Hall, media director at the RDW Group ad agency and a contributing editor for the Marketing Wonk Weblog, told me the implementation of the IE pop-up blocker is critical, and a default "on" setting would effectively kill the format.

"I think there will be a dramatic decline in the use of pop-ups and hence, the revenue they generate," Hall said via e-mail. "Already, there is backlash in the advertising community against the format in that the use of pop-ups is perceived to give the advertiser a bad name by association with all the other sleazy companies that still use pop-ups. With the growth of rich media ad formats (expanding banner, page takeovers, etc.) and other more effective forms of online advertising, I am quite sure the pop-up is on its last legs."

So for all you frustrated readers, amen!

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Related Links
Advertising.com: Study Reveals Optimal Online Ad Frequency and Additional Interactive Advertising Performance Metrics
Internet.com: Yahoo! Joins Cadre Speeding Demise of Pop-Ups
Marketing Wonk Weblog
Paul Thurrott's WinInfo
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