-By Mike Shields

The online display advertising market is seriously underperforming and urgently requires a higher level of sophistication, if it is ever going to earn its fair share of marketing spending.

That was one of the key messages delivered by Jonathan Miller, News Corp.’s chief digital officer, during a keynote address on Thursday (Nov. 5) at the Ad:Tech conference in New York. When asked what issues keep him up at night, Miller zeroed in on the display market, which has been hit hard by the recession and an overabundance of inventory.

Miller said one of the questions that worries him most is “[Will] display really get its act together?” When the amount of time users spend with the Web is taken into consideration, the amount of dollars allocated to display ads “seems ridiculous,” he added. “It’s incredibly low.”

Miller said that during the recession, premium online ad selling has been hurt disproportionately, as more brands pour money into direct-response tactics and ad networks. “People have pulled back from [branded selling], he said. “It has to get more sophisticated. There is increased pressure to get that figured out.”

Going forward, Miller sees the online ad space as segmenting into three large buckets: premium inventory, targeted inventory driven by rich data and the long tail. He sees the most longterm potential in the first two buckets, particularly for News. Corp. The company is currently looking to reinvent MySpace as a community where consumers gather around content they are passionate about—which should appeal to brand advertisers, said Miller.

Meanwhile, the massive Fox Audience Network (FAN), which aggregates data from News Corp.’s sites and matches it to inventory on hundreds of Web sites reaching a total of 158 million unique users, is poised to become one of the largest ad networks in the industry, said Miller. In fact, Miller believes that the glut of ad networks will soon thin out—with only a handful of top players remaining. The remainder of the online ad network business is likely “to be disintermediated...and move to an exchange model,” he said.

Perhaps as a demonstration of FAN’s growing clout, Miller announced a new deal between between the company and WPP, which will see the agency holding company tapping into FAN’s audience segmentation data for its clients. In exchange, FAN will receive consumer insight data from WPP’s research division Kantar.
 
“There is more data than most online marketers know what to do with but not enough insight or action,” said Mark Read, CEO of WPP Digital in a statement. “We are delighted to be working with FAN to integrate Audience Insights into the various WPP platforms, extending FAN's analytics across more publishers and more channels, online and offline, than ever before.”