Display ads are hurting while online search ads remain strong, the New York Times reports today. Specifically, PubMatic, an advertising-technology company in Palo Alto, CA that runs an online-pricing index, found the prices paid for online ads bought through ad networks dropped 23% from March to April 2008.

This drop in pricing has hurt some companies' results:

• Time Warner Inc. (NYSE: TWX)'s AOL, parent of BloggingStocks, saw an 18% decline in display advertising revenue to $191 million.
• The New York Times' (NYSE: NYT) Internet ad revenues increased 16%; a year earlier, though, they increased 20%.
• WebMD Health (NASDAQ: WBMD) revised down its 2008 revenue guidance to a range of $380 million to $395 million, from a range of $395 million to $415 million thanks to lower expected ad revenues.

The good news? Surprise! -- Google Inc. (NASDAQ: GOOG). In the most recent quarter, Google had a profit of $1.31 billion on revenues of $5.19 billion. Its United States revenue was up 30%. The reason is that display ads don't offer a tangible payoff to advertisers whereas search ads do.

Advertisers are simply trying to maximize their returns on the advertising investment (ROAI). If someone comes along and offers a higher ROAI than Google, advertisers will switch to that provider. Meanwhile, those stuck with display advertising will suffer at Google's hands.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.