During the dot-com bust, IAB head Greg Stuart frequently attached “much-maligned” to banner ads. And they were. The click-through rates, the original sin of online advertising, were (and are even more so today) pitiful. Banners were uninteresting, people ignored them, and marketers were falling in love with paid search instead. The IAB embarked on lots of studies to prove how effective banners can be beyond the click – and even beyond an eventual transaction. Where is the industry six years later? It often seems back where it started. Display advertising, if you want to use the fancier name, is in crisis. AOL just reported an 18 percent drop in ad revenue – and that’s with growth in search. Its display business is so bad that AOL this week bragged about a deal to run FreeCreditReport.com banners all over its ad network. It’s not alone: Yahoo and Microsoft both have struggling banner businesses.
Why is that? The economy clearly has a factor. But it’s probably more than that. Advertisers, I think, are questioning the entire notion of buying bits of real estate on the periphery of content. It’s just not that enticing – and with good reason. Despite all the studies showing banner ads increase search conversions and do some to lift brand metrics, consumers don’t seem to care. Think about it this way: U.S. Internet users saw 4.5 trillion banners last year, according to ComScore. That’s 2,000 per user a month, 24,000 for the year. David Verklin put it to Wenda Harris Millard the other week during a discussion I moderated: Who remembers any of them from last month, much less clicked on one? (I firmly believe all ad clickers are Midwest stay-at-home moms.) I asked my own Twitter following this same question. The answers, from a sample that’s heavily skewed to people in this business, are illuminating. A sample:
The argument that always comes back, other than dubious Dynamic Logic research, is how many newspaper or magazine ads do you recall? Fair enough, but that’s a crappy argument to make in this economy. Besides, do Internet publishers really want to follow the lead of the newspaper industry? Supply of banners is far outstripping advertiser demand. That's a big problem. Solving the problem will take many things, including better creative, targeting and forms, but it also starts with admitting there’s a problem, not shifting blame to the economy or advertisers who "don't get it." I'm with these HBS guys: publishers need to think more like marketers and, like it or not, mesh advertising with their content.