Spend any time aound the advertising business and you hear about the famous quote from Philadelphia department store magnate John Wanamaker:
"Half the money I spend on advertising is wasted; the trouble is, I don't know which half."
With the advent of trackable Internet advertising, it appeared that Wanamaker's dilemma might finally be solved. By being able to monitor what ads readers click on, it's possible to determine which advertising is most effective—and which is wasted.
But what if Wanamaker was wrong? What if the wasted part of his ad budget wasn't half? What if (shudder) it was more like 90 percent—or more?
That's what we're finding out as we learn more about how people use the Web and Web advertising. What's a good clickthrough rate on a Web ad? One or two percent. Wanamaker would be appalled.
For decades, advertisers were kept blithely in the dark about advertising effectiveness. Like Wanamaker, they assumed there was a certain amount of waste in the system, but that was just the nature of mass media: you paid for a certain amount of eyeballs and hoped that some (or, in Wanamaker's formulation, half) paid attention to your ad.
But in the new era, we know a lot more about how visitors react to an ad they see on a Web site. Regardless of how many may see an ad--and let's face it, a banner ad doesn't have anything like the visual impact of a large newspaper print ad--it's possible to measure exactly how many click on it for more information, or to take an action. And sorry, Mr. Wanamaker and your successors: it's just a handful of the people who see the ad.
This is one of the reasons why Web marketers, including newspaper sites, worry that online revenue will have trouble matching print revenue—because savvy advertisers won't pay for the waste anymore. Unfortunately, little has been done to make Web advertising more effective. The banner is still the basic unit of measurement, and while larger ad sizes have finally started appearing, the equivalent of the full-page newspaper ad is still an online pipe dream. (The less said about pop-ups, pop-unders and interstitials, the better--if anything, the annoyance factor makes them less effective, though their clickthrough rates tend to be higher.)
This is why a lot more attention needs to be paid to finding new forms of advertising and online revenue generation. The banner and its ilk are vestiges of the old print display ad mentality: show it and they will click, we hope. Alas, they're not very effective. For starters, good creative design makes for effective advertising, and a lot of what passes for Web advertising remains fairly pedestrian and unaware of the strengths of the medium. Video ads finally are appearing, and they're a big step up. So are ads that genuinely invite interactivity (like a good Flash game), or even more advanced forms of revenue generation that go beyond advertising and provide value-added services to advertisers.
Alan Jacobson of Brass Tacks Design, who blogs thoughtfully about the media business, is a forceful advocate for a complete rethinking of how newspapers view Web advertising. Crunching numbers in a way that John Wanamaker would appreciate, his latest post argues that the stats newspaper Web sites are showing advertisers are so misleading and inaccurate (and meager) that they're actually discouraging advertisers from spending more on the medium. It's a good read, and he ends it with a quote from Forbes that nicely sums up the problem:
Traditional media sell advertisers a pig in a poke. Advertisers don't know whether a reader actually looks at their ad much less buys anything as a result. And they can't really target their ads beyond picking a type of newspaper and section to focus on in the hopes of reaching a particular demographic group.
Google and its ilk only charge advertisers when a viewer clicks on the very page containing their ad and perhaps, in the future, only when the viewer actually buys something. Plus, they can use all that information collected from past searches and other information they’ve gleaned about viewers to target ads with an increasing degree of accuracy. The technology is a different as a Schwinn one-speed bike is from a Porsche 911 turbo.