Converting InDesign File to PDF for Web

Hi,
I designed an ad that is to be used for web view only in InDesign (CS3 on PC). The file restrictions I have been given require that it is 72dpi and a PDF file. When I convert to PDF(smallest file size,no spot colors, compressed), I end up with a file that is 4MB. I'm assuming a file that is 72dpi and 6.25"x9.25" shouldn't be that big. When I look at the "Audit Space Usage" window, 90% is under "Contents Stream" (I don't know what this means).
I'm new to creating files for web viewing so I'm not sure how to go about accomplishing this without losing image quality. I've tried "reducing file size" and the "PDF Optimizer" in Acrobat. I always get the message "The PDF document contained image masks that were not downsampled." when I attempt this.
What do I need to do to create a PDF file with these specifications that will retain some of the image quality (won't look pixelated and be read-able)? I don't mind recreating the ad in Illustrator, or Photoshop if I can guarantee that I can end up where I need to be.
I would really appreciate any tips on this!!

You mention pictures. If the file is mostly pictures, then the first step is to reduce the picture content, possibly by using 256 colors rather than millions and such. Check the properties of the settings file for the conversion (I don't have current versions available to check right now - you also did not mention your Acrobat version). It is probably best to down sample in a graphics program such as Illustrator or Photoshop (depending on the image being vector or bitmap) and then include them in the original. It is always a good idea to work on a copy and leave the original in place. Trying to do the reduction in Acrobat is not the best approach.

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