Banners in crisis

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.

Comments

[Matt Mantey]

What people say and what people do online is completely contradictory. Drag a respected publisher ad ops person or ad network product dev person into this discussion and the story is very different. The real actions that come from banners is astounding. Yes, a large majority of viewers ignore them and say they don't see them. The notion of a banner influencing search and later action (like directly typing in the url) speaks to this reality. It also speaks to the completely unrealistic value placed on a click. The concept of someone clicking on an ad and drifting down a conversion path multiple clicks later is silly. Building models to read view-based actions and relative contribution attribution is mandatory.

[tom]

There's been lots of reports over the years that support your position of "only women in Muncie, Indiana click banners."

http://pokenewyork.com/story/fun-stuff/bing-bong-we-gatch-yer-bannerz/

rawk.

/ t

[Alan Wolk]

The whole notion of banner ads is built on a fairly antiquated notion.

Back in early 1.0 days, there wasn't much of any real value online and so clicking on a banner was likely to take you someplace just as interesting as where you were. (Hence, the whole notion of "surfing" the web.)

But that hasn't been the case for a while.

We either need to accept that banners are the online version of print ads and that they will sometimes affect behavior-- just not that very second. Because we no longer "surf" - we go online for very specific purposes.

So it's both presumptuous and naive to think that if I have gone to say, weather.com to check to see whether I need an umbrella that day, I'm going to then spend time clicking through to a Delta Airlines banner and spend the next 15 minutes booking a vacation. (Oh wait, I think I'm supposed to call that "creating a deeper level of engagement." My bad.) It's as if outdoor advertisers worked on a model that said billboards would make drivers abandon their intended destinations and head to the stores being advertised. Because who needs to go to work if Ragu spaghetti sauce tastes just like homemade. Turn that car around and head to the A&P.

The other problem plaguing display ads is that they want to be direct response ads but without all the messy stuff that comes with direct response ads. You know, actual offers people might want to actually take advantage of and calls-to-action that aren't afraid to be calls to action.

Finally, they need to make it easy for me to find the page they're driving me to if I want to come back later to take advantage of that particular offer. That's a simple as having a simple url at the end of the banner (e.g. delta.com/bannerad) which never happens because it would screw with the metrics being used to measure the banner's effectiveness.

Coming down from soapbox now.

[Rich Nadworny]

Online ad creative is in a sorry state, unfortunately. Hard to remember something that is completely unmemorable. There are a ton of sites and pubs showing good creative in everything else, but only one, BannerBlog, showcasing online ads. That, if nothing else, says volumes about what we're seeing online and why we're not clicking.

[Alan Wolk]

@Rich N: I agree completely with what you're saying, but I don't think that's the problem. The problem is we're expecting these banners to be direct response vehicles, which is an unrealistic proposition.

There are plenty of brilliant creatively done billboards. Many of which got me to think of brands in a different way and maybe even purchase something, but none of which ever caused me to pull an immediate u-turn, abandon my plans to go out to dinner and head straight to the store.

Which is essentially what banner-ad-as-DR-vehicle is asking us to do: abandon whatever it is we were doing online and go off to buy the product.

[Simon]

I agree. Banner ads - to a much greater extent that print, i believe - are largely ignored. Of those minimal clickthroughs, how many were intentional?

Advertising needs to mix it up and find ways of working alongside content in a meaningful way without being intrusive to the point of people going elsewhere. A less annoying version of an interstitial (eg half-screen ad) and sponsored editorial would be a good start...

[michael maurillo]

Hey Simon, i have an example of a site that is finding ways of making its advertisers work alongside it's content - pandora.com.

I couldn't agree more with this post, and more so with Alan's comments. I spent a large part of my career on the agency side selling banners creative to clients. Really, we're all to blame for this. The agencies that sold (sell) banner strategies to their clients b/c they know they will buy them and it's an easy deliverable to mark-up. The brand managers that are afraid of any other type of digital tactic b/c it is the closest thing to what they know best - tv & print ads (even though we know that's not true). And the properties that sell the ad space b/c they haven't come up with another way to monetize their business.

Back to Pandora. I continue to be impressed with their ad model. Not just how well they integrate something as basic as a display ad into their experience, but how they have found relevant and contextual ways to integrate their advertisers into the experience without getting in the way. To be honest, what they are doing is not earth shattering. They have just made a commitment (from what i can tell) to keep it simple. Both in the creative integration and the actual quantity of ads (i've never seen more than 1 advertiser display ad at a time).

At this point i'm really saying nothing more than they are a good example on how to make it work, certainly not that display advertising is the way to make "it" work.

[Ben Kunz]

Brian, two thoughts. First, banners can work, like direct mail, if the small % of respondents make economic sense. Asking people if they recall clicking on banners is a bit misleading, since of course 99.86% of the time people don't click. Banner CTRS were around 5% when banners were novelties in the 1990s and fell, but stabilized, in the 0.14% click-through-rate range today.

Look closely at that 0.14% click-through rate. A web site with a $20 CPM ad = 1,000 impressions, with a 0.14% CTR = 1.4 respondents. $20 / 1.4 = a $14.28 visitor to a web site checking out a product. An 8% conversion to sale = a $178 marketing cost per sale. If your profit is above $178, this model makes sense. Works for Lexus. Many marketers are delighted with a $178 cost per sale.

Second, the decline in total ad spending online may not signal less interest from advertisers, but simply advertisers getting a better buy as the online marketplace grows more efficient. There is tremendous pressure on CPMs as media buyers get smarter and move dollars from $70 CPMs on WSJ.com to $3.50 CPMs, or better yet $1.50 CPCs, on ad networks. Dollars are migrating from the marque sites to the long tail of ad networks, which scoop up inventory and sell it for far less.

So declines in aggregate ad spending online could be a sign of *efficiency* in buying, not a decline in *interest* in the ad medium.

I agree there is tremendous waste online -- social media sites, for example, often have exaggerated CPMs as users refresh the pages every 6 seconds -- but overall the marketplace is becoming more efficient, driving down ad costs and thus pulling down aggregate spending.

[Ben Kunz]

@awolk - If you clicked through my Twitter ad ;) see my response to Brian above.

[Alan Wolk]

@Ben: So your point is that.... spam works? I mean clearly all those Viagra and Penis Enlargement vendors are making some kind of scratch from their emails, otherwise they'd quit sending them.

Banner ads kind of work the same way. Only Lexus isn't a Penis Enlargement pill (well, not officially, anyway.) So you tick people off, miss the opportunity to reach the 99.86% of people who don't click through. Yes, there is a place for and a reason for direct mail and banners with offers that encourage people to click on them. But you're being disingenuous to suggest that should be the bulk of their online (or offline) efforts. Brand advertising isn't measurable. Ever. But it is necessary, especially with a parity product like Lexus.

[Ben Kunz]

@awolk I disagree partly, my friend. Here's why.

1. Most banner ads are ignored. They cannot offend if people don't see them, so comparing them to email spam which forces you to read around them and click "delete" is an exaggeration.

2. Yes, I agree with your point that banners are a waste for branding. Anyone who pushes that concept is either a silly creative interactive agency (trying to get design work) or a silly publisher (trying to make excuses to sell wasteful ad inventory). As I said above, 99.86% of online "impressions" are never seen.

3. However, I stand by the mathematical model that there is enough response from banners to make them function efficiently as a direct marketing model.

For most of our clients we recommend only a 5% to 10% allocation in online media -- and tracking allows us to see if this direct response portion works within targeted costs per gains. Broadcast and other traditional media usually foot the bill for branding, and internet typically never stands alone.

[Monica Fineis]

Very interesting. Do you think LinkedIn ads are more successful or credible?

They're super targeted, text only and link back to the profile of the person who created the ad.

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There is tremendous pressure on CPMs as media buyers get smarter and move dollars from $70 CPMs on WSJ.com to $3.50 CPMs, or better yet $1.50 CPCs, on ad networks.

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