This is the billion dollar question — literally.  Online display advertising is a $8B industry so the stakes are high to justify that spend.  A lot of businesses, from Microsoft to iVillage, make a lot of money on display ads.  So there is a lot of data to support the value of this online media.  But there is also a lot of data that questions the value of display ads.  Let’s take a look at the data and come up with a point of view:

1)  Do people click on display ads?

According to this article from MarketingSherpa (link here) the overall average for display ads is 0.21%.  Of course, it greatly depends on the quality of the creative and the quality of the placement.  But from my experience this is a good benchmark.  Note that this number is down from the 3% I saw in 1999 and the 1% I saw in 2002.

So for every 1000 impressions expect 2 clicks on the display banner.  Which means that a $2 CPM works out to $1 per click.

I don’t think anyone would argue that the CTR on banner ads is extremely low.  So low that you have to justify them on some other measurement….

2)  If they don’t click on them than what’s the value?

According to a ComScore study (link here):

• It’s clear that display advertising, despite a lack of clicks, can have a significant positive impact on:
  
• Visitation to the advertiser’s Web site (lift of at least 46% over a four week period)
  
• The likelihood of consumers conducting a search query using the advertiser’s branded terms  (a lift of at least 38% over a four week period)
  
• Consumers’ likelihood of buying the advertised brand online (an average 27% lift in online sales)
  
• Consumers’ likelihood of buying at the advertiser’s retail store (an average lift of 17%)

This ComScore study shows that there is value of online display ads in terms of awareness that drives future actions such as visiting the web site or increased purchase intent.  So maybe they do have value.  But let’s look at banner ads ability to influence the consumer….

3)  Does anyone notice banner ads on web sites?

According to this study by Harris,  37% of respondents found TV ads helpful while only 1% found banner ads helpful.  Pretty conclusive that banner display ads are not noticed.  Just ask yourself when was the last time you took notice of a banner ad.

TV Wins - Banner Lose

4)  So why does it seem that the ComScore study contradicts the Harris study?

These studies are done to prove a certain point.  They are not academic studies for information sake.  They should be taken with a huge grain of salt.  For instance,  the ComScore study says that banners drive future behavior.  But advertisers don’t buy online advertising in a bubble.  They are buying that advertising to promote a product or service that will also be promoted through other channels.  Of course traffic to your web site will increase during the time you are promoting your product via banner ads.  For example,  a company might buy banner ads during the Christmas season to promote a great gift.  That product might also be in print, radio, TV, PR, promotions, and other channels.  As well as the natural traffic increased driven by consumers seeking out info during the holidays.  All driving traffic up.  ComScore’s study is associating that traffic solely to the banners.  Take a look at ComScors’s business model to determine why they are motivated to make that connection.

5)  Why do TV ads work so much better than Online ads?

Why do TV ads seem to have such a bigger effect on the consumer than online display ads?  Because TV ads are delivered in a linear disruption path.  The consumer has no choice but to watch the TV spot.  They have to watch it as they wait for their show to come back on.  This is a Linear Disruption Path.

Online ads are on an  Asynchronous Disruption Path — meaning that the consumer can ignore them while they continue on their primary task of ready the article or watching the video.

6)  If banner ads don’t work what does?

I’m in online marketing for a reason — online marketing can drive business results.  Now more than ever there are huge opportunities to engage consumers and activate them to walk down the purchase path.  This post is already too long so I’ll tackle this topic next time.

Conclusion

Unless you can drive clicks from an extremely compelling banner campaign that then captures the consumer’s contact information for future direct follow up you may want to find better ways to spend your online ad budget.

ADD:  Here’s an article from ClickZ that has data around how online brand marketers are measuring (actually how they are not measuring) campaigns:

http://www.clickz.com/3634438