There was an interesting piece today in the LA Times about websites being increasingly forced to monitor content in order to attract advertisers. Yahoo has shut down its user-started chatrooms after several advertisers pulled their stuff. It seems that some legitimate companies were disturbed that their advertising was placed in user-started chatrooms dealing with pedophilia and other highly objectionable topics.

This occurs at the same time as my man Cody has recently noted that advertising is rapidly moving to the internet.

It should come as no surprise that increased advertising dollars will bring changes to the way the major internet sites have to operate, and this will impact the nature of the internet. The ultimate impact is difficult to predict, but we can make some guesses and suggest some ideas.

As Cody notes, traditional media companies including Viacom ( NYSE:VIA ) and Clear Channel ( NYSE:CCU ) are going to feel the pain as advertising drains out of TV, radio and outdoor formats where they dominate. These may represent shorts or at least "avoids" in the market. The same is largely true of most newspapers and many other paper publications that are dependent on advertising for their survival. Some of these will find new homes on the web, as many magazine publishers are already discovering, and others just won't figure out how to survive. Various credible web advertisers will gain, but one might argue that much of this potential gain is already recognized in the stocks of such companies as Google ( NasdaqNM:GOOG ) and Yahoo ( NasdaqNM:YHOO ).

But there are implications beyond this.

The nature of internet advertising is that it can be far more accurately directed than any other medium. Advertisers looking for maximum effectiveness will learn to tailor their messages to individual constituencies far more than they ever have had to in the past. The "general purpose" network TV or magazine ad will be replaced by dozens of smaller-circulation ads pitching each individual product.

There are two significant implications to this. The first is that the business of managing such advertising is going to get far more complex. Existing agencies are obviously in the best position to exploit this, but there are probably new opportunities as well. The entire business of crafting individual "narrow" messages and placing them effectively is going to balloon.

At the same time, total money that is spent through to the advertising media will probably decrease. The ability to more accurately target likely buyers is going to mean less spending and more efficiency overall. I think this is one of the reasons Yahoo and Google might be overstating the future reality. They won't get all the money that's coming out of other mass media, they'll get a portion of it, after allowing for the greater cut in advertising administration described above.

While the money spent on internet advertising will grow, the number of sites on which it is spent will continue to shrink. Just as advertisers have historically had a lot to say about the TV shows they placed their ads on, so will they have a lot to say about the content and nature of the websites they advertise on. Many segments of the internet will remain free-for-alls, but they will not be supported by large advertisers. Google's Adsense and Phil Kaplan's new service AdBrite will continue to offer a mechanism for smaller advertisers to target less credible and less well-monitored sites. Smaller blogs (like this one) will go without advertising.

Incidentally, an interesting business would be to qualify and quantify website content for advertisers. A company that gets a handle on doing this could have a huge impact on the ability of smaller and lesser known websites to "certify" their credibility or the nature of their content in a manner that would make them more appealing to larger advertisers who are unwilling to take the risk of their ads accidentally ending up on an objectionable site. I don't believe anybody is doing this for smaller sites right now, but feel free to let me know if I'm wrong.

Finally, I do believe that advertising as we know it is going to look for new ways to get products in front of people. More and more, people are using a variety of technologies to block any any all advertising from even being shown. I know I do it, for no better reason than that some of those more complex animated and java-based ads tend to slow things down and chew up bandwidth that I would rather dedicate to something else. Sponsorships and product placements in everything from videogames to movies are obviously things people have discussed, but I suspect there are some other great new ideas out there that haven't been pursued yet. Any ideas? Let me know.

-btc