Banner Ads - What Are Banner Ads Supposed To Do?, Targeting And Tracking

Ever since their debut on the HotWired site in October 1994, banner ads have been the dominant format for online advertising. They also have been a disappointment for advertisers and Web site publishers alike. They have been blamed, perhaps unfairly, for everything from the high rate of failure of content-based Web sites (which are dependent on advertising revenue) to creating a one-inch wasteland on computer screens.

Banner ads come in a variety of sizes and are measured in pixels. The most popular size in 2000 was the 468-by-60 size, which was used more than six times as often as the next most popular size, 125-by-125, according to the 2000 Engage Adknowledge Online Advertising Report. In February 2001 the Interactive Advertising Bureau (IAB) released a new set of recommended guidelines for banner ad sizes, but it remained to be seen whether these would be adopted by the industry. In general, the newly recommended sizes were larger and would require more computer memory.

While banner ads were the dominant online advertising format in 2000, they fell out of favor with advertisers as click-through rates declined. According to a report commissioned by the IAB, banner ads accounted for 47 percent of online ad revenue in 2000, but only 40 percent for the fourth quarter, confirming the decline in revenue from banner advertising. By mid-2000, click-through rates had fallen to.3 percent, with business-to-business advertisers reporting average click-through rates around.5 percent. In other words, only three to five of every 1,000 impressions resulted in a click-through on a banner ad. In an environment where there were too many ad pages and too few advertisers, the cost of advertising online fell dramatically and an estimated 75 percent of the Internet advertising inventory remained unsold.

Some of the potential benefits of banner ads resulted in criticism of the banner ad format. While they had the potential to be the most targeted and most measurable of all advertising media, online advertising in practice often was poorly targeted and not measurable. For example, click-through rates may be used to measure an ad's effectiveness in terms of making a sale or generating some other type of consumer action, but they cannot be used to measure how effectively a banner ad builds brand awareness.