By Reshma Kapadia

NEW YORK (Reuters) - Ad executives from the largest Internet media players defended online advertising this week, but said a sea change about the definition of advertising has to occur for the current gloomy perception of the market to lift.

Online advertising has been defined by banner ads displayed at the top of Web sites, which have proven to be the most effective way of using marketing dollars. In the dot-com heyday, Internet media companies were flush with cash as start-ups spent lavish amounts to create brands.

Now that those days are over advertisers are demanding results for the ads they buy.

The new way to view online advertising is as a means of increasing a company's productivity and profits, said executives on a panel at a Credit Suisse First Boston media and broadband conference in New York.

The market, which has seen a sharp deterioration in spending as dot-coms go under and economic uncertainty causes others to curtail expenses, is currently driven by CPMs (cost per thousand views of an ad) -- the traditional way of charging for ads.

``It's a commodity marketplace. There is no future in that,'' Myer Berlow, president of worldwide interactive marketing at AOL Time Warner Inc. (NYSE:AOL - news) said Friday. ``As long as we think this is a CPM business, we are dead.''

The value of online advertising is in making it easy for consumers to do something, said Berlow, a panelist at the conference.

``A seamless movement into marketing is what works. It is not about ads. It is about making it easier for me to pick a book,'' he added.

As the dot-com market has unraveled over the past year, Internet media companies have been among those taking the harshest beating as they see their revenue growth -- often largely dependent on advertising -- slow.

Companies like Yahoo Inc. (NasdaqNM:YHOO - news) and DoubleClick Inc. (NasdaqNM:DCLK - news) have warned of revenue shortfalls and have been moving aggressively to boost their bottom-line with new services.

AOL Time Warner has been able to weather the storm so far, posting an increase in its ad and commerce business for the quarter. A key reason, it said, it that it enables advertisers to promote products through its flagship Internet service, as well as traditional media assets like Fortune magazine and HBO cable network.

``We also don't have just inventory to sell. We are not constrained by the number of eyeballs. We have other things that can be put together for a marketer, Berlow added, noting the company's recent sponsorship of Warner Bros. artist Madonna (news - web sites)'s upcoming World Tour and the opportunity for its partners to also be part of that promotion.

Yahoo's Murray Gaylord, vice president of brand marketing, also said his company is going after the same traditional advertisers as rival AOL Time Warner.

He attributed the decline in Yahoo's first-quarter revenue as a result of the dot-com shakeout, but he said there would be companies who would want to advertise at both AOL and Yahoo -- much like companies who buy ads on the three major television networks.

``They've got a good story, and we've got a good story,'' Gaylord told Reuters.

Information Draw To The Web

While few people will go to the Web for information about detergent, they will go online for information about cars, technology, insurance and travel. These are the types of companies that may most benefit from online advertising, said DoubleClick Chief Executive Kevin Ryan.

E-mail marketing, which often commands higher ad rates because of its ability to better target customers, is also poised for growth, Gaylord and Ryan said.

However, Berlow played the contrarian and said e-mail marketing -- while it allows advertisers to give consumers information for something they had expressed interest in -- it does not have much long-term potential in e-mail marketing.

``It rapidly becomes spam,'' Berlow said. ``It's a mistake to overuse short-term things that work and overlook the long-term value of giving people convenience to get where they want. Short-term it will keep us going in bad quarters maybe, but it doesn't grow the ad business.''