Banner Advertising

Since the earliest Banner Ads appeared online in the 1990s, the progress of display advertising has taken us all by surprise.

A Little Bit of History

The earliest web Banners were, although clickable, very basic billboard style Ads. Nevertheless, they received a whopping 78% click through rate. Online Banner Advertising escalated from there, being sold and valued based on the number of impressions they created.

This continued until 2000 when the Banner Ad market crashed and their worth was re-evaluated. Ad networks such as GoTo.com (now Yahoo! Search) and Google turned Banner Advertising into a performance based model and they started to be valued and sold based on their click-through.

There are three major components to the future of Banner Advertising:

Their Value

The average number of times a Banner is clicked on by users (the click through rate) has now dropped to less than 0.5%. Having been measured based on click-through performance metrics since 2000, the effectiveness of Banner Ads has once again started to be questioned. Sceptics say Banner Advertising is dead, but this is clearly not the case.

Although the Banner is not extinct, the performance based metrics and overabundance of publishers’ inventory has devalued its worth. Publishers would sell premium inventory (ad space) and then flog their remnant inventory to the ad networks. As the supply of remnant inventory outgrew advertiser demand, the prices plummeted. eMarketer reported in 2009 that ad networks slash inventory prices up to 90%. It has come to the stage where some publishers say, there’s become a blur between their premium and remnant inventory.

One would think this massive price cut would benefit advertisers. Of course they get cheaper Ad placements, but you do get what you pay for. To compensate for their price cuts, publishers have started making more space available and selling more inferior remnant inventory. The quality of this inventory is continually criticized.

If you’re an advertiser using an ad network, you never know where and when your Ads will appear. Although they continue to improve targeting technologies, ad networks ability to place your Ad on highly targeted pages is still limited. Another eMarketer report in 2009 stated that marketers were by far the least happy with ad networks’ performance.

The poor figures have caused marketers and researchers to reassess online Display Advertising. Studies have found that customers are influenced by Banner Ads even though they don’t click on them. Researchers have started to show that the click is not the right metric to be focusing on. Rather, they suggest we should be gauging the Banner using a view-through rate or dwell time.

So where does this take the industry? Advertisers have already begun to look for placing their Banner Ads directly with relevant and niche content websites and blogs. Publishers will continue to study the effectiveness of Banner Ads to show their value beyond the click. This will be especially difficult, considering advertising budgets were slashed dramatically during the global financial crisis in 2009.

Even though many advertisers have begun to restore their budgets for 2010, their belt-tightening shrewd stance has remained. It will be a challenging task for publishers to transform the performance based click-through valuation of Banner Ads. Perhaps, with enough power behind them, this is what the future will hold.

Technology

As technology evolves at an escalating rate, so too does the implementation of online Banner Ads. From the earliest static Banners on pre-Netscape mosaic browsers, Display Advertisements have evolved to include animation, sound, rich media and even interactivity. They have been incorporated into online games and even the mobile phone.

Marketers are now focusing on augmented reality to interact with consumers through their Banners. For example, Burger King’s augmented reality Banner shows their $1 menu once the consumer flashes a US dollar bill to the webcam.

So what does the future hold for banners in terms of technological advances? Only time will tell.

The Marketplace

The marketplace for buying and selling Banner Ad space has largely been carried out via ad networks, ad exchanges and direct private sales.

Ad networks such as Google Adsense and Yahoo! Search connect publishers and advertisers that are part of their network. Publishers nominate the space they would like to sell through the network and the ad network automatically places Ads in that space. The ability of ad networks to place Advertisements on directly related and targeted websites has been criticized. This is coupled with the ad network needing to fill their overabundant inventory with ads, resulting in mediocre placements and dissatisfied marketers.

Ad exchanges such as AdBrite, Google’s DoubleClick and Right Media Exchange on the other hand work with the whole market, rather than a small percentage of the publishers and advertisers they’ve signed up. They enable the publisher to set an asking price for their inventory (on a CPC, CPA or CPM basis) and if this doesn’t get sold, then it goes up for auction in the marketplace. Many exchanges convert the costing basis to an eCPM so it’s easy to compare the cost. You can set a reserve price for the auction and many ad exchanges offer the ability to revert your unsold inventory back to your nominated ad network.

There are many benefits to using ad exchanges and ad networks for buying and selling inventory including efficiency, since everything is automated, and thorough reporting. However, as marketers become increasingly dissatisfied with ad networks ability to target placements and likewise publishers’ relentless discounting of inventory, a shift will be made to using ad exchanges. However, the complete phasing out of ad networks is unlikely. They are still useful for selling what ad exchanges and direct sales can’t.

Site owners and advertisers also have the option of buying and selling Banner Ad Space directly. This cuts out any middleman, leaving more in the pocket of the publishers. It also enables advertisers to choose exactly where their ads are placed and when – giving them control of over their targeting campaign.

Buying and selling Banner Space directly is a superior avenue for dealing with quality premium inventory (such as home page placements). It enables advertisers to buy placements based on time, rather paying for each click or thousand impressions, which are the only costing methods offered by ad exchanges and networks. It also enables advertisers to reach their highly targeted audience whilst leaving ad exchanges and networks to get that wide reach.

Websites are now starting to emerge where publishers and advertisers can find each other and transact directly. Cutting out the middleman will enable site owners and advertisers to negotiate directly and take control of their campaigns and inventory.

The future? It seems likely that premium placements will continue to be negotiated with advertisers directly, whilst leaving remnant inventory to be sold by ad exchanges and then eventually ad networks.