According to the updated Natural Born Clickers research completed by Comscore and StarCom “The percentage of Internet users who click on display ads has dropped from 32 percent to 16 percent in just two years, with only 8 percent of people on the Web now accounting for 85 percent of all clicks”

The research attempts to position the Click Through Rate as an unreliable measure of the true value of display ads.  The logic goes that a display impression can move attitudes towards a brand and ultimately sales without the Click.

I’m still a skeptic.  Display ads are a form of direct marketing and are best used to move a consumers into action.  Whether that action is a sale, a lead, captured consumer data, or enagement the display ad is best optimized to deliver a click.  With less and less consumers clicking on ads we’ve got to get more and more creative if we are to move that consumer into action.

Internet Marketing Growth

Forrester’s predicts growth in all areas of internet marketing with the most pronounced increases coming from Social and Mobile.  (Here’s the link)

Thoughts:

• More funds will be directed to online but keep in mind that over 80% will still be put towards “traditional”.  What these top line numbers don’t show is how “Traditional” will merge with “Interactive” over the next few years.
• Social Media is predicted to grow the most over the next few years.  It will be interesting to see how this evolves as Facebook and the others look to develop revenue models.
• Search is king.  Why?  Because Interactive marketing works best for direct response efforts and search marketing is the king of direct response.  As marketers we need to understand when to use which tool and don’t try to shoehorn objectives into unsuited tactics.

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

Affiliate marketing is when an advertiser pays an Affiliate network to distribute it’s display ads to web site owners.  I’ve used Commission Junction (CJ) in the past — but there are several large affiliate networks out there.

It works like this; let’s say an insurance company wants to sell some insurance.  They could go to Commission Junction (or one of the other affiliate networks) and create an account.  They then upload their banner creative and set the amount the are willing to pay web site owners.  The beauty of affiliate marketing is that the insurance company only pays for performance — they can pay per click, per lead, or per sale. Usually they would pay per lead or sale.  So they only pay the web site owners when a sale is made.

Then a fellow with a web site logs onto Commission Junction and copies the insurance companies banner ad creative code to his web site.  If traffic to his web site converts into a sale he gets a check from Commission Junction.  Amounts vary from a couple pennies to a couple bucks per sale — depending on the product sold.

Affiliate marketing is great for products and services that are sold directly over the internet.  Or products and services that require a lot of inbound leads to generate a sale.  I like affiliate marketing because I only pay for a sale.  I get my ads all over the web and only pay when the ad generates a paying customer.

Downside of affiliate marketing is that you can’t control where you ads get displayed.  And there are a lot of unsavory characters out there doing very gray things to turn affiliate ads into sales.

Here is a recent example of a banner ad campaign interacting with the web page to make a more dramatic pitch. And hopefully increase click through rates. This is a iPhone ad the appears to interact with the entire Yahoo page.