In a recent blog on the state of the online ad industry, Chas Edwards, CRO of Federated Media, highlights the fundamental difference between display and graphical advertising.

Edwards argues that “graphical advertising” has no context, and is invariably served up to users without any real purpose except to drive numbers to make a purchase or to fulfill an action.

Display advertising was always about association with a publisher’s brand and strong content.

Advertisers would pay a premium rate for display ads, but not merely because they could use colors and pictures in the ads. They paid a premium because display ads did more than drive calls to the phone banks; the adjacency to the editorial content and the association with the publication’s brand helped advertisers “create” demand among readers who didn’t yet know they wanted or needed something.

Online “display advertising” is no different: top brands want to engage users, and associate with strong content sites. In their view graphical advertising will not add any value to their offering.

AOL’s ad revenue decline points to, in Edward’s opinion, the over dependence on “graphical advertising” by large portals.

Sustained interaction with their audience allied with “display advertising” on relevant content sites looks increasingly like the campaign of choice for top advertisers.