Display Ads Back From the Dead

Display ads, originally known as banners, are the Lazarus of online advertising. They’re staging a comeback, just after being given up as dead.

Perhaps it’s more accurate to call these ads, the first type of Internet advertising to appear back in the 1990s, a sort of Mark Twain phenomenon. Reports of their demise are greatly exaggerated.

Display ads, once known as banners, are what most people think of when they think of online advertising (unless they’ve just been annoyed by a pop-up). The classic banner is 468 X 60 pixels, contains graphics and appears at the top of a Web page. These ads now come in different sizes, locations and media types. Unlike pop-ups or interstitials, display ads don’t appear and disappear. Display advertising sales were expected to decline 6 percent in 2003, to just over $3 billion, according to a July 2003 online advertising forecast by Jupiter Research (owned by Jupitermedia, which also owns this publication).

But overall ad sales for every category of online advertising were expected to reach about $6.3 billion in 2003, according to the Jupiter report . That means that display ad sales would comprise almost half of all online ad sales.

The same principle held in the quarterly Internet advertising revenue report by PricewaterhouseCoopers and the Interactive Advertising Bureau on 2003’s second quarter and first six months’ results. This report found display ads accounting for 22 percent of total online ad revenues during the second quarter of 2003, down from the 32 percent reported in the second quarter of 2002. (Overall revenues were about $1.66 billion for this period.)

Despite this decline, display ads still had the second biggest piece of the online ad revenue pie in the first six months of 2003. Display ads comprised 23 percent of the first six-month revenues of 2003, according to the report. Keyword search, the term used to describe paid search in the study, brought in 29 percent of the first six-month revenues. Classifieds, a fast-growing but nascent entity, were third, with 17 percent of the nearly $3.3 billion in overall online advertising revenue for 2003’s first half.

“Currently, in 2003, paid search and display ads are neck and neck,” said David Berkowitz of eMarketer, an e-business research and analysis firm. “Going forward, paid search will be the dominant category. But display ads are not going to disappear.”

Overall, the future will be probably be stable, if not positive, for display ads. For one thing, there’s the overall comeback in the industry, which experienced its third consecutive quarterly revenue increase in the second quarter of 2003, according to the PricewaterhouseCoopers/IAB report. But that’s not all.

“The growth rate for display ads looks good,” said Gary Stein, a senior analyst with Jupiter Research. “Display advertising is far and away bigger than paid search. Paid search is going to grow like crazy but it won’t get to the level of display ads.”

Display ad sales will turn around beginning in 2004, according to David Card, Jupiter Research’s VP and research director. Better inventory control by publishers and a broadband kicker will push display ad sales up over 15 percent in 2004, and over 20 percent in 2005 and 2006, according to Card.

The best-performing online ads this year were display ads, along with paid search and contextual ads, according to Michael Zimbalist, executive director of the Online Publishers Association. And, like Jupiter’s Stein, Zimbalist predicts a rosy future.

“New formats such as the half-page ad offer a larger, richer canvas for display ads, and rich media gives them a more varied creative palette,” Zimbalist said. “There wasn’t much you could do with the traditional 468-by-60-pixel format. ”

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