Online Advertising - Banner Ads Dominate Online Advertising Formats

Although still the dominant format in the year 2000, banner ads were in decline and losing favor. One problem had to do with click-through rates, a measure that advertisers used to help determine return-on-investment (ROI). Since many Internet users go to Web sites to perform specific tasks, it's not surprising that they often ignore unrelated messages. By mid-2000, click-through rates had fallen to.3 percent, with business-to-business advertisers reporting average click-through rates around.5 percent.

The key to successful banner advertising is proper targeting, which ensures that ads appear in contexts relevant to the target audience. Banner performance also can be enhanced by purchasing larger banners; this might involve purchasing what is called the "sky-scraper" unit, which runs down the right-hand side of a Web page, in addition to the standard banner centered at the top of a page.

Advertisers who are focused on ROI typically use banner ads to drive traffic to their Web sites. Another strategy involves using banner ads for brand building. The practice of using banners for brand building recognizes that driving traffic may not necessarily be the best measurement of a banner's effectiveness. Click-through rates do not measure offline actions that people may take as a result of seeing a banner ad, nor do they measure visits to Web sites that may take place later as a result of seeing an ad.

Effective use of banner ads also is dependent on profiling techniques. The pioneering Internet advertising agency DoubleClick Inc. introduced its proprietary DART (Dynamic Advertising Reporting and Tracking) software technology in 1996. DART enabled the company to determine within 15 milliseconds which banner ad should be presented to the current user, based on pre-selected criteria. In order for DART to match ads to target audiences so quickly, it uses the controversial "cookie" technology that creates a user profile and monitors an Internet brows-er's movements through Web sites in DoubleClick's media network. Using this technology DoubleClick created a database of user profiles that enabled it to better target banner ads to users who visited Web sites in the DoubleClick network. Similar technology is used by other online ad networks such as 24/7 Media and Engage.

As the technology for profiling Internet users improves, targeting and banner performance will become stronger. Technology advances also are expected to enhance the performance of other Web marketing techniques, including opt-in e-mail, sponsorships, Webcasting, and rich media advertisements. Rich media ads cover a wide range of formats. The more widely used and accepted rich media formats include HTML pull-down menus and forms, Java and JavaScript, Audio, Enliven (by @Home Network), Flash (by Macromedia), Jump Page, RealAudio (by RealNetworks), Shockwave (by Macromedia), Video, and VRML.

According to a report commissioned by the Interactive Advertising Bureau (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. Sponsorships accounted for 28 percent of online ad revenue for the year and 31 percent for the fourth quarter. Other types of online advertising cited in the report included classified ads, which accounted for seven percent of online ad revenue for the year and 10 percent for the fourth quarter; referrals, which accounted for four percent of online ad revenue for the year and five percent for the fourth quarter; interstitials, which accounted for four percent of online ad revenue for the year and five percent for the fourth quarter; e-mail advertising, which accounted for three percent of online ad revenue for the year and four percent for the fourth quarter; and rich media, which accounted for two percent of online ad revenue for the year and for the fourth quarter. Keyword searches accounted for one percent of online ad revenue for the year and two percent for the fourth quarter.