Feb. 27--Display advertising, long regarded as the ugly stepsister to search advertising, is about to get a makeover.

Technology companies like San Mateo-based Aggregate Knowledge and ChoiceStream, which has an office in Palo Alto, say they can dramatically increase the effectiveness of the colorful boxes, banners and flashy graphics that set off display advertising on Web sites.

Search ads are the ads that usually appear as words or sentences, often on the right hand side of search results. When someone types "mortgage" into Google, for example, ads for mortgage companies pop up. If the person clicks on the ad, advertisers pay Google whatever amount they pledged in an auction with the Internet company.

But with display ads, advertisers simply pay to have their banner ads appear on a Web site, sometimes shelling out $20 to $30 per thousand page views. While as many as 14 out of 100 people may click on a search advertisement, only about 1 out of 1,000 will click on a display ad.

Last year, Google rang up more than $20 billion in search-advertising sales. Yahoo, which relies on both search and display advertising, rang up $5.4 billion in search advertising and $1.8 billion in display advertising. Meanwhile, Internet revenues at the New York Times, which relies only on display ads, were $309 million.

Usama Fayyad, who is a board member of Choice- Stream and Yahoo's former chief data officer, said the problem with display advertising is that it hasn't been targeted to users as effectively as search has. "People didn't think about the true economic cost of serving the wrong ad to the wrong audience, so therefore, over time they manage d to destroy the long-term value of display advertising," Fayyad said.

What ChoiceStream and Aggregate Knowledge do is allow advertisers to "retarget" a customer who has been to their Web sites.

"In the mode of search marketing, you only get one crack at the customer and that's the end of it," said Fayyad. "Display multiplies the chances a publisher has to show an ad."

If technology companies can boost the effectiveness of display ads, industry observers say they could potentially slow the downward spiral of display ad revenues for newspaper companies and brighten the prospects of Internet portals like Yahoo and AOL. Indeed, better display advertising could make any business that distributes content on the Web more valuable.

Research firm IDC says display was battered during the fourth quarter of 2008, falling 7 percent. In contrast, search advertising rose 10 percent.