A very interesting article in today's AdWeek by Mike Shields called Is The End Near for Display Ads? and you know what? I don't think he is that far off. Before my answer, a couple of interesting points from the article.
- Even those who said they believe in the power of display advertising acknowledged the industry faces a major challenge in proving its worth, particularly as bottom-line-obsessed CMOs fixate on click-through rates for banners that rarely approach 1 percent.
- It’s really the question of brand versus direct response,” said Vivek Shah, group digital president at Time Inc., who recently characterized display advertising as being “under assault.” Said Shah: “In times like this, the balance can tilt towards direct. That’s a challenge for traditional content sites that rely on display ads.”
- Jim Spanfeller, CEO of Forbes.com, ....“Ad networks have pushed the focus back on [cost per click],” he said.
- Carrie Frolich, managing director, digital media at MEC Interaction, ...“The industry is still focused on impressions as a currency,” she said. “People are not impressions.”
This article is one of the most interesting and thought provoking articles I've read in a long time. I've know Jim Spanfeller a long time and the first time I heard him speak he was guaranteeing positive branding results of display ads on Forbes.com. Vivek Shaw owes me lunch from back when he met with me at Harrisdirect and I convinced him to put in a broker center with button ads on CNNMoney.com. I met Joanne Bradford when she was with MSN and she was the executive who helped me get Senator McCain's search campaign in MSN way back for his Straight Talk America PAC. That's quite a list of who's who in online advertising.
So what do I think of display ads? They are absolutely on life support and have been for a while. I doubt they will end, but their dominance in this space is over. The click rates still hover at way too low of a level, they take a lot of effort to produce, you need a Dynamic Logic study to measure brand impact, and as mentioned above, we unfortunately count impressions not people. Heck, social networking with its abysmal CPCs and CTRs are far more effective of a channel if you stick to word of mouth marketing.
This is a screen shot of one of the highest clicked ads for Senator McCain's campaign. Even if I told you the exact CTR it wouldn't matter. Let's just say that it had a click rate higher than 1% which means that the vast majority of people didn't click on the ad so they didn't watch the video. Generating donations from banner ads are hit and miss unless we do revenue share. Even Senator Obama's campaign focused on creating beautiful ads that reinforced his brand and didn't focus so much on post-click actions. I ran display ads for my own Board of Education campaign, but that was highly targeted, cheap, and had a short timeframe to generate the most earned media and local buzz.
So why are banner ads on life support? Simple (the details after the continuation link)
- Google is the industry's best friend and worst enemy (I've advocated recently shifting all online ad dollars to search marketing)
- The branding argument for display ads is weak at best
- Creative development takes too long
- Why do we still count impressions?
- Marketers demand more than a 300x250
What's going to happen with the display ad? Costs will plummet and end up where they were in 2001 - mostly performance based. That is unless we can sell based on individual or focus on better creative types like pre-roll.
(more on the continue)
- Google is the industry's best friend and worst enemy. You long time readers know that I'm a Google Junkie. Google puts tools at your fingertips no matter how much you spend. You track CPCs, CPAs, cost per video view, and reach/frequency numbers. You can target anyone by genre or demographics and pay for this all with a credit card. It puts so many things at your fingertips that you have a hard time dealing with other publishers that make it harder on you. Now Google adds in display ads and even though they are of the internet cheese variety they are FREE. Your success with search ads will make it much harder to justify huge cost expenditures elsewhere.
- The branding argument for display ads is weak at best. How many times have you heard people talking at the water cooler regarding a smart banner? Like almost never unless you work in an agency. You need to run branding studies to actually prove it out, but often the offline folks will downplay the results as not being significant or having a selection bias. If a marketer talks about branding they will either go TV or Radio first and that's where they'd rather spend their money because of historical impact. TV while facing its own challenges (DVR for one) is still the top dog for branding.
- Creative development takes too long. Need a text ad? That's done in a matter of minutes. Flash ads? That requires creative briefs, story boards, messaging, pictures, animation, and if you are lucky 2 rounds of creatives before it is delivered for trafficking. It takes too long to create quality flash ads that actually perform and that's after running a whole bunch to find the one that actually works the best (maybe if you are lucky a 1% + CTR). It is much simpler to plow your time and money into video ads that you can use offline and online, but the simple Flash ads takes too long. I often ask myself, why? when it comes to making display ads. Max out search first...
- Why do we still count impressions? Search has the benefit of counting clicks on search queeries so while it might be the same person, it is theoretically better to come at them from different search angles. Display ads would have a competitive advantage if we counted individuals rather than a made up currency like impression. Marketers get GRPs (unfortunately) and they can translate that into individuals (not actual but derived) and of course direct mail is at the individual level (print forget about it - that's garbage media). Online - the great tracking channel - impressions...that's a garbage metric.
- Good Marketers demand more than a 300x250. I had one marketer during the 2008 cycle who received tremendous results of an eyewonder video ad unit but he was disappointed because more people didn't turn the sound on. They got tremendous play rates of the video, good CTRs (<1%), but they still weren't satisfied. I tried selling them on pre-roll at the beginning of the campaign but they thought it was too expensive. At the end, they backed into an equivalent TV playback number and low and behold the campaign wasn't cost effective. If you run a brand campaign online run the best units you can with the best targeting; don't try and save on it. You can actually run a good social networking campaign which will help with your branding goals if you can turn users into brand evangelists; it will cost you a lot less too.