Display Ad Clicks Drop 50 Percent, Marketers Cringe

One of the mantras guiding online marketing is to measure everything that matters and then optimize. The typical MO is to run as many CPC programs that you can afford or manage to create a baseline; do A/B or multivariate analysis to optimize; then prune low yield programs and further optimize on the ones with the best returns. But what happens when, despite adherence, to this mantra the historical performance levels of display ads starts to fall?

Recently, ComScore published a study showing the number of US consumers who clicked on display ads had dropped by 50 percent in two years. While drastic the impact could be due to a decline in the number of CPC display and affiliate programs run over that time, however; other factors were implied in the study. Between 2007 and 2009, the number of people who clicked one or more display ads a month dropped to 16 percent, with about 37 percent of those users accounting for 50 percent of all clicks. In shorthand, that means 6 percent of internet users represent 50 percent of the clicks, and another 10 percent representing the remaining 50 percent. All this indicates a seriously diminishing audience.

While CTR is a standard measure in the online advertising business, these new figures suggest that focusing on click through optimization may be an incomplete or insufficient strategy. Since when has optimization based on only 16 percent of the user base been a truly encompassing plan?

What about the other 84 percent of the audience not engaging with display ads? What does it mean for advertisers? If you believe in an efficient market and that online advertising is ahead of the overall advertising industry as recent studies indicate – then something else is at work here. Do display ads, or any ad impressions based advertising, really matter?

On my company and our partners’ sites, we have seen significant traffic spikes to our home page/partner home pages while running CPC, CPM, or CPA programs. This suggests that people are not clicking but going directly to the advertised site. Our internal analytics system has tracked multiple exposures and non-ad clickers to a conversion on our site, verifying that the display ads themselves indeed play a role in driving frequency and/or engagement before an eventual conversion on our site.

So are display ads dead? I don’t think so, but display ad CTRs are certainly suspect as a meaningful measurement. The new data and implications about branding, frequency, and engagement lead me to believe that we require a new line of thinking and analytics to measure the true value of such ad units.

About Duane Kuroda

Business ninja, deal hunter, Internet marketer, and technology fiddler obsessed about growing companies and launching products. Currently at Peerspin, Duane’s past lives include Vice President of Marketing roles at companies leading micropayments, Internet video, and online communities as well as research and consulting for mobile advertising. Duane has spoken at conferences including Digital Hollywood and Digital Video Expo on topics covering monetizing online content and online video, has appeared on TechNowTV and KNTV, and has been quoted in various magazines. Follow Duane on Twitter: @dkuroda.

7 Responses to Display Ad Clicks Drop 50 Percent, Marketers Cringe

  1. I agree with you, Duane.
    With visitors getting more & more immune to banners, though ads aren’t surely dead as of now. But it is definitely the time to consider options of diversification through multiple choices available online.
    What could be your suggestions?

  2. Duane Kuroda says:

    The basic answer is experimentation, I believe, but depending on your budget and infrastructure, experimentation may not be that easy but does require some trial and error on multiple options.

    We have our own internal tools for non-linear open loop conversion analysis, but the same can be approximated with patience and multiple analytics and marketing packages working in tandem to approximate multiple user conversion flows. Setting up the systems to see where users loop or cross on paths based on single and/or multiple exposures can provide insight into direct click based conversion version exposure based influence and conversion.

    Without more hairy detail, I'd add that the analytics folks be willing to have educated guesses and test them over and over to determine which of your experiment choices actually pan out.

  3. I have been designing and helping small businesses with display advertising since the days where mostly standard 468 x 60 banners where spread across tons of webpage’s back in 1993 on the free Link Exchange system. This was also when Net gravity was the ad server making waves online before it was bought by DoubleClick. Since then display seems to rise and fall with the Ocean.

    I however for one do not believe display will ever go completely away but I do feel that creative needs to become more intelligent & much more targeted IF you’re looking for “Click Throughs”. Note I said IF & the reason is because of exactly why you talk about exposure & influence. In the way old school marketing days it was said that it would take a person at least 3 times to view an ad before they became aware of it.

    It would also be great to see some studies done on display ad impressions vs. content ad impressions. Is an official graphical display ad more impacting than a content ad impression? If so is this in certain cases or all cases?

    I for one do not believe in the last click getting all the credit. When it comes to marketing I believe a holistic “sharing the love” between all your efforts is the best approach.

  4. T Foster says:

    One thing to consider here is the proliferation of new content and thus more ad inventory via user contributed media. The conversation is now two ways in the online media landscape, which makes publishers eager to populate this new content with new ads, putting a higher scarcity on attention as it relates to the entire number of banners competing for finite attention.

    The abundance of choice has been attacked by recommendation engines and services such as the genius feature in itunes. With better targeting we can hopefully make ads more relevant, and with relevancy we should see an improvement in CTR.

    Banners will always be a vehicle for brand awareness, yet most marketers back into a CPA with banner campaigns anyway. This along with the data from the IAB regarding the dominance of performance pricing implies that marketers always seek a measure-able result. The key will be to offer the marketer the ability to pay for the furthest point in the marketing funnel. e.g if an impression is all the marketer gets, thats all they should pay for. if the banner results in a sale, then he should pay a higher price for that transaction. If we achieve this point, we should see less cringing and more smiling.

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