The Reports of My Death are Greatly Exaggerated
September 4th, 2008
This oft-attributed quote to Mark Twain might sum up how the online display ad industry feels about Jessica Vascellaro’s article in today’s Wall Street Journal, Gap Widens in Online Advertising, but the display ad industry is wrong.
Traditional, non rich-media display ads are an archaic media product that should be designed and coded out of the standard web user interface.
If the market has its way, the above suggestion may end up being less Draconian and more Darwinian.
The WSJ article points out that search advertising media spends are growing, but display advertising is essentially flat as a percentage of overall spend. There’s a variety of reasons, but the bottom line is that marketers are recognizing that display ads aren’t showing an acceptable retrun on investement.
Faced with a slowing economy, advertisers are sticking to what they view as the safest way to reach online customers directly: the plain text ads that appear on search-result pages. Search-ad spending is on track to reach $10.4 billion this year, double what will be spent on display ads, according to research firm eMarketer.
That divergence of fortunes may be bad news for companies counting on a comeback for display ads, which ruled the Web in its early days. Though Yahoo and others say they have seen demand for these ads as they introduce technologies that better target the ads, they have been slow to regain favor.
A few months ago I had lunch with Troy Young, who runs marketing at Video Egg. You don’t find guys much smarter or experienced in digital than Troy, whom I first met when at Fox and he was with our media agency Organic.
I told Troy that I thought there would ultimately only be a market for two types of ad units online, Search and Hyper Targeted Video. All the rest of the display ad category, including rich media units (which are really just banners with bells and whistles) would extinguish or be relegated to an after-market of remnant inventory bulk sales sold at a CPM of pennies or fractions thereof.
Troy disagreed vehemently. He was bullish on the display ad market, mentioning that it was a . Admittedly, I would be too if my business was creating cutting edge media campaigns for brands and advertisers. Troy has led Video Egg into new businesses and they’ve done a good job of leading innovation with their creative services shop and developing new ways to show ROI through engagement as opposed to impressions served.
But the numbers for display ads, which rely on the click-through as the measure of success, just don’t make sense, and the WSJ article speaks to it. In addition, Comscore’s recent report on who clicks on display ads helps explain why marketers are pulling back on display ad budgets. ROI isn’t being proven with display ads. In fact, the majority of people who do click aren’t representative of the general population and therefore the metrics that brands and advertisers spend can’t be presented as real ROI data. From the Comscore report:
The study illustrates that heavy clickers represent just 6% of the online population yet account for 50% of all display ad clicks. While many online media companies use click-through rate as an ad negotiation currency, the study shows that heavy clickers are not representative of the general public. In fact, heavy clickers skew towards Internet users between the ages of 25-44 and households with an income under $40,000. Heavy clickers behave very differently online than the typical Internet user, and while they spend four times more time online than non-clickers, their spending does not proportionately reflect this very heavy Internet usage. Heavy clickers are also relatively more likely to visit auctions, gambling, and career services sites – a markedly different surfing pattern than non-clickers.
Numbers tell one story, but do display ads pass the stink test? Think about it, do you or anyone you know click on banners? Display ads are inefficient at the most basic level - users aren’t looking for ads on content sites - they’re looking for content.
Dropping diplay ads from websites would be an economic hardship for those sites who rely on the ad revenue and for the creative shops and media agencies that make their bread on building, buying and selling the units. But despite the consensus that the internet is an ad-supported platform, consumers don’t want to be served ads.
At least that’s what it seems the market is saying.
Tags: banner units, display ads, troy young, video egg, videoegg
Posted by: jake Posted in Advertising, BusinessYou can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
September 6th, 2008 at 1:26 am
I completely agree with you here, Jake. I never recommend banners for my clients, even though other marketing agencies make good money by designing them. The existence of ad-blocking software alone should compel advertisers to consider other options. I recently wrote a post on this topic: http://coolrulespronto.wordpress.com/2008/01/04/banners/
September 24th, 2008 at 6:58 pm
[...] kvetched recently about how I think the world would be a better place if display ads, which are all about scale, were coded out of existence and replaced by contextual [...]
December 16th, 2008 at 6:45 pm
[...] But we knew that already. [...]