I attended Chinwag Live’s “Advertising Woes” last night in Soho, and it was well attended by various luminaries in the UK digital scene. There was a lot of interesting discussion about the state of online advertising and how shrinking marketing budgets are exacerbating the present problems in the industry.

Perhaps the most interesting point of the night was the idea of “polarisation” in the online advertising market. Brands are now only interested in two types of advertising: CPA and “value-added” display advertising.

The popularity of the cost per acquisition model is no surprise given the dwindling budgets available to marketing departments. CPA is a cost effective way to get maximum results for very little commitment. These types of campaign work relatively well when you have scale, but ultimately add very little value to brand awareness.

Value-added display advertising is essentially campaigns involving display advertising on appropriate and relevant content sites. Many brands are now interested in what their users are saying about them, and want to include them in the process. Strong content is often created around the campaign, building strong brand recognition. It can often take the form of user generated content or editorial from publishers the brand wants to be associated with.

Cisco’s recent “Welcome to the Human Network” campaign is a good example of how all these elements can be used to positively promote a brand. Working with several of Federated Media's publishers such as Boing Boing and Mashable, participating bloggers conducted interviews with engineers and produced special video segments around areas such as social media and online dating. This was juxtaposed with video footage of ordinary folk speaking positively of how Cisco products help them in their everyday lives. All this content was hosted on a microsite designed specifically for the campaign.

This initiative was supported by display advertising across relevant content sites. It ultimately helped to raise the profile of the Cisco brand, promoting the idea of Cisco being much more than a teleco and router hardware manufacturer.

The competition for “value-added” display advertising budget will intensify this year. The question from advertisers and media planner buyers will be how you add value? Understanding the brand’s audience and building strong content around campaigns would be an excellent starting point.