Bigger and Better as the Industry Matures

The new online ad standards approved by the Internet Advertising Bureau (IAB) last week are a good indication of a maturing industry. The specified ad sizes primarily include skyscrapers (vertical columns 600 pixels high) and larger rectangles, showing a significant push away from the standard 468 x 60 pixel banner. Additionally, seeing ad standards becoming more flexible is refreshing, as it provides advertisers larger dynamic spaces in which to display enhanced creative concepts.

These changes also highlight that most advertisers are no longer satisfied with the exposure they receive from the old standard banners, whose effectiveness has been scrutinized for well over a year — since industry average click-through rates (CTRs) bottomed out to below 0.3 percent. But as they did with the banner, advertisers will probably soon begin scrutinizing the value of the new skyscrapers and rectangular standards. As these formats become more familiar to surfers, the novelty will likely wear off, and fewer users will be clicking. The industry will again attempt to break through these barriers by initiating new opportunities and creative approaches. It is a healthy sign.

Is There a Price to Pay?

However, those advertisers still impressed with CTRs will likely be blown away with the new formats, which should initially yield higher response rates simply due to their novelty and freshness. Regardless of clicks, the new ad sizes, skyscrapers in particular, will allow designers to be creative with a larger space for portraying messages. A hurdle likely to be incurred is Web-page ad clutter, with multiple ads showing at a given time, thus devaluing each individual placement on the page.

The new, bigger ad units are also an indicator that for ad-supported Web properties to prosper (those still around), they must continue to give up more and more of their real estate to supporters, thus taking away some site content. Slowly but surely, this market’s supply and demand will stabilize, and breakeven points will be realized through what publishers need to make available and at what price based on advertisers’ requirements. This process will continue as the market continues to shake out and through constant trial and error until equilibrium is reached.

Are Banners Still Effective?

On the other hand, although banners have taken a bad rap as of late, they are still effective ad vehicles for branding and yielding conversions. As it does with banners, the success of the new ads depends on the price and pricing structure of the space; an overall return on investment (ROI) must still be consider beyond the relevance of the audience.

For example, a simple run-of-network banner buy may no longer be worthwhile to the advertiser paying $10 CPM (cost per thousand impressions). However, that exact same inventory purchased on lower-priced CPM or cost-per-click (CPC) terms might yield acceptable returns for the dollars spent.

It is ridiculous to just assume banners are useless. There is a fair cost to everything associated with a given response rate, and it’s up to the buyer to ensure no potential opportunities are overlooked. I’ve recently been working with a client on a campaign that has yielded the best conversion rates to date via CPC banner buys. Not to say that this strategy is for everyone, but it still certainly has a lot of value — numbers don’t lie.

Perhaps the greatest benefit of the original standardized banner thus far has been the ability to run the same creative across ad networks. Standardization has allowed advertisers to reach audiences on thousands of different Web sites with great convenience, efficiency, and pricing. It is nearly impossible to coordinate deals regularly with so many individual Web sites on your own, and inventory bought through a network is often sold at liquidated prices that could never be achieved individually. Furthermore, just imagine the hours and coordination to get this accomplished without the middleman. From this perspective, the industry has benefited a great deal from standardization.

Banners have helped develop industry standards and will likely continue to play a prominent role in the industry for the next few years. But clearly, these newly approved standards have been timely and should satisfy demands for a while, at least until the next opportunity to develop another response to demanding advertisers is forced. It is healthy for the industry to continue changing with the times, and we benefit from organizations such as the IAB assuming this role in standardizing procedures for everyone involved.