/ 19 February 2007

Online ads: What’s working?

The internet allows us to target advertising to an unprecedented degree, so why are most banner ads still served on such a hit-and-miss basis?

Publishers slap up an insurance ad on a homepage in the hope they will get the industry average 0.3 percent click-through rate or more. If they achieve that click-through rate, everyone is happy. But here is the question – what happened to the other 99,7 percent? Surely by any standards this is a pretty inefficient ratio? It may be at first glance, but that 0.3 percent is still valuable enough for advertisers to achieve major return on investment by forking out big bucks to be on the major sites.

The type of client found on local online publishers give us a clue as to what is working on the web. For example, insurance and car companies have had a very successful love affair with the internet. The one thing they have in common is that a single acquisition equals very high value for them, for example someone buying a car or taking out a long-term insurance policy. It’s also why the high-worth online audience, which can afford to pay regular premiums, works for their brand.

If an insurance advert is shown on a site with 800,000 page impressions and it in a month generates 2,400 click-throughs, 600 leads and ultimately 70 long-term sign ups – well then that’s good business for the advertiser. Just as 10 or 11 car sales in a month from a medium-sized online advertising campaign is also good business.

The same would not be true for a company that sells an inexpensive product. It’s just simply not worth it for them to pay for hundreds of thousands of page impressions that would ultimately only generate a few leads on a product that doesn’t cost very much.

But all this still represents online advertising at its crudest. Even though the dismal click-through rates and hit-and-miss approach may be working for many online advertisers, a fraction of the internet’s potential is being used. Advertisers are going to become more demanding in their need to target and get more value for their bucks. But it will also mean that online advertising will get more expensive as advertisers get better return on investment.

In some respects, Google Adwords have led the way for online advertising. Google has shown how to target adverts to an unprecedented degree. Google Adwords boast click-throughs way higher than 0.3 percent. Ads are served that are only relevant to the content displayed on a page. It’s targeted advertising at its most efficient.

Adserving is increasingly becoming more of a specialist field, just as website metrics is maturing into a specialist area that most publishers are outsourcing. A new generation of adservers offer increased sophistication in their ability to track user behaviour and serve ads in a targeted way. They will track user behaviour, including surfing history, and integrate with a publisher’s user databases, and show ads based on specific content or searches, much like Google adwords does.

Online advertising actually resembles advertising in traditional media in its current hit-and-miss mould. That’s probably why advertisers are ok with it for now. But as online advertising evolves into the sophisticated, targeted form it should be, it will be interesting to see of advertisers will start demanding the same levels of sophistication from traditional media.

Matthew Buckland is publisher of Mail & Guardian Online. Read previous columns @ www.mg.co.za/netsavvy