The True Value of Online Display Ads
Are my banner ads working?
A dialog has begun in the advertising world about the relative value of advertising in the online space. The problem: how to appropriately value online ads. Pay per Click ads have a built in edge when it comes to tying to an ROI – client clicks on ad, comes to website, purchase product. Simplistically the ROI = (average purchase * conversion rate – cost per click) / cost per click. But online purchase for most goods and services are much more complicated than this; other advertising has an impact prior to the click.
Ad Age recently featured an article on the relevance of display ads versus pay per click advertising. The article, first in a series, is titled, “Why the click is the wrong metric for online ads”, by Abbey Klaasen. To summarize this article points out the problem with assigning credit to the last ad clicked. This loss of credit has a negative impact on media that contribute prior to the “click”. The whole sales process is also clearly affected by the all other ads in the process and the recommendation is to leverage metrics to clearly illustrate the value of all ad spending. Accurately assigning credit is a critical long-term issue; media business models that can help advertisers value this credit appropriately will naturally evolve in time. (Micro-payments, subscription, social voting/payment… how it shapes up will be interesting.)
Reaction to this article:
- Don’t throw away ‘clicks’ as a metric – but instead combine response metrics with reach metrics, like ‘impressions’, to get the complete picture of advertising impact and the true ROI of an online campaign.
- Use analytics for every online campaign – for planning, execution and optimization.
Another whitepaper cited in this story goes into even more detail; “How Online Advertising Works: Whither The Click?”, by Gian M. Fulgoni, CEO and Marie Pauline Mörn, Director, Product Management, both of comscore, Inc., this fantastic paper was presented at the Wharton Empirical Generalizations in advertising Conference for Industry and Academics, Dec 2008. The primary takeaways from this paper are:
- Online display advertising provides a clear lift to online and offline purchases;
- The lift from online display ads extends for several weeks; and
- Combined Search and Online Ads provides the largest lift.
How to use this information now?
Online advertising rates are low both on a CPM and pay per click basis. Now is the time to learn how to use display and search effectively in integrated campaigns. As media determine how to more accurately value, and charge for, online advertising these rates will increase. Companies with the best information about online effectiveness of each medium will be able to optimize spending most effectively.
Online campaigns should be a mix of search and display for maximum benefit. (In dollar values the comscore paper shows a lift of 124% compared to 76% search alone and 27% display alone.)
Plan online campaigns and scientifically measure the results as an integrated whole. Determine a mix of display and search ads for the product and market. Devise control groups. Launch the campaign and measure effectiveness using reach and response metrics. Determine overall campaign ROI – including all campaign elements.