Today’s environment demands that all web-based businesses scrutinize their marketing plans to ensure maximum return on each advertising dollar. So it is somewhat distressing to me that lately “the banner” as an advertising medium is receiving more than its share of bad press. As a representative of the online advertising agency world, I would like to add in my two cents here to help dispel some of the myths and misperceptions that are giving banners a bad name.
It is irresponsible to state simply that “banners don’t work” or “click rates are miserable,” phrases I have heard thrown around without much thought too many times. No one can dispute the fact that the average click-through rate has plummeted since the inception of the banner. But there is much more to the story and what its implications are for media buyers. The following points challenge three assumptions regarding click rates, still the most pervasive measuring stick of banner effectiveness.
Given that click rates have fallen to fairly predictable levels, an advertiser should be able to calculate exactly how much it should spend on a banner ad placement. Before placing ads for our clients, we first determine such objectives as cost per visitor and cost per acquisition for the campaign and then estimate the click rate per desired placement. We then back into a CPM level that is acceptable. This exercise provides our basis for negotiating with the sites on which we place ads. To state that “banners don’t work” means that you are paying too much.
Although the response rate per individual ad has fallen, as a whole, the number of ads that each user clicks on per month is increasing. This is because online advertising is growing faster than the number of Internet users. Additionally, the typical web page carries more ads than ever before. In
Salomon Smith Barney’s
analyst report “Adverse Perceptions Mask Compelling Realities” (September 18, 2000, Lanny Baker), Baker quantifies this assumption. According to his estimations, the typical user now sees 300 online ads per week versus 75 in 1997. Furthermore, the report goes on to calculate that the average Internet user is actually responding to a growing number of ads per month (1.78 ad clicks per month per user in 2000 versus .74 in 1997). The decline in click frequency for any single unit of ad inventory is directly due to the pervasiveness and increasing popularity of the Internet, and this is a normal process for any maturing medium. TV has seen similar effects as more and more ads are squeezed into each broadcast hour. What’s more important is delivering a powerful message to the right person to be heard above the noise.
If someone sees an ad but doesn’t click, it does not mean the ad had no impact; just as a billboard on the side of the highway might have an impact on drivers as they pass by, so ads can have an impact on viewers who didn’t click on them. This is something many of us inherently know and have talked about here, but it deserves repeated emphasis. AdKnowledge quantified the phenomenon in its groundbreaking first quarter study of 2000, finding that more people go to a site and purchase as a result of seeing an ad and NOT clicking than as a result of clicking directly into the site. In addition, various branding studies have found that every ad impression has important branding and awareness impact not seen in click rates alone. For example, a 1999 study by Ipsos-ASI found that online banner advertisements are as effective as television advertisements in their ability to increase consumer brand awareness.
If these points are not convincing enough, I think the numbers speak for themselves. Advertisers vote with their dollars. The Internet Advertising Bureau’s latest report predicts that online advertising revenue for 2000 should exceed $8 billion compared with $4.6 billion in 1999 and $2 billion in 1998. And banners continue to be reported as the dominant type of online ad, contributing 50 percent of dollars.
Furthermore, when considered in relation to the advent and subsequent growth of other traditional media outlets, online ads as a whole are gaining popularity at an extraordinary rate. The cable television industry took nine years to garner a market share of 2 percent of total U.S. advertising expenditures, yet online advertising has already captured 2 percent while still in its nascent stage.
If banners are ineffective, why is online advertising continuing to flourish with banners leading the pack? Just as with any traditional TV, radio, or print campaign, the only reasons for “bad” banner ROI are poor messaging, misplaced targeting, or overpriced CPMs. Banners can be and frequently are efficient direct marketing and brand awareness tools, especially when part of a well-integrated online-offline campaign. If many of the misperceptions about banners out there are cleared up, the growth of online ad dollars would be poised to explode past all predictions.