Banner vs. Search Ads

Internet players who win similar trust and popularity could command premium rates for advertising and related services. Below them, in Tobaccowala's view, a vast contingent of competitors will sell ads at commodity rates, the online equivalents of pork bellies and West Texas crude. The battle ahead in every branch of Internet advertising is to gain a foothold among the ruling class.

Online advertising breaks roughly into two camps. The fastest-growing side has been search-engine advertising, led by Google and Yahoo. This industry has zoomed from zero to an estimated $5 billion in six years. The process starts as advertisers bid for keywords, whether "Viagra" or "Miami hotels." When a Web surfer enters those words, their ads show up alongside the search results. And they pay an agreed price to the search engine every time the ad is clicked. When it works, search provides such rich data that advertisers can calculate minute by minute the return on investment for each keyword. It's an unprecedented level of accountability -- provided the clicks are real. Last year search-related advertising was on pace to grow 27%, as was the competing camp, display ads.

But advertising executives predict that the display banners and videos that appear on Web pages will outpace search this year. "Most of the big money [advertisers] -- cars, movies, packaged goods -- are putting more of their budgets into display," says Jeff Lanctot, general manager at agency Avenue A/Razorfish (AQNT ), the world's largest buyer of Internet ads. "We think growth in search will fall back in '06." Google's chief financial officer, George Reyes, hinted much the same when he indicated on Feb. 28 that Google's per-customer growth in search advertising had topped out, triggering an investor stampede.

As brand advertisers push into display ads, they're hungry for new measurements. With the page view as its standard metric, display has always been far less accountable than search. Sure, Web sites can count the times an ad pops up on a page someone visits. But how many of the readers actually focus on the ad? Studies show that they take in only an average of one of every 12 Internet ads. What's more, in display advertising, even the more concrete metric of clicks is questionable. "Click measurement has been abused," says Greg Stuart, president of the Interactive Advertising Bureau in New York, an industry group. "There's no relationship between clicks and brand awareness."

Some 18 months ago, Stuart's group set out to quantify the value of Internet ads and to compare them with advertisements in other media. The agenda was clear: to attract advertisers, who were placing only about 3% of their budgets online. The resulting IAB studies, which involved 30 major advertisers, including Procter & Gamble (PG ), Kraft Foods (KFT ), and Ford Motor (F ), used testing methods similar to those of social scientists. They created control groups, exposed them to mixes of advertisements from various media, and tracked their effects in recall, brand recognition, and intent to purchase. The IAB concluded that most of the advertisers were underspending online -- and advertisers agreed. Ford, which was spending less than 5% of its ad budget online, quickly moved to triple it.

The ideal is not only to reach viewers but also to get them to spend time with the ad -- and signal to advertisers what interests them. Clicks achieve that, but many surfers are wary of detours and fearful that unknown sites might infect their computers with spyware. This has led advertisers to their latest wrinkle: measuring the movements of the mouse. New interactive banner ads spring to life when the Web surfer crosses them with the cursor. No click necessary. Some of them balloon into mini Web pages as you browse. Others sprout arms and legs pitching cars or recipes.The advertisers don't always know who the Web surfers are, but they often know which Web page they have come from. They can track which parts of the banner appear to interest visitors and how long they spend there. This contributes to an avalanche of data. "We have so much data that agencies are hiring teams of analytic people, PhDs in statistics, to make sense of it all," says Greg Rogers, director of strategy and insights at MEC Interaction, a New York media agency.

Kraft Foods builds entire campaigns around interactive banners. Before holidays, it serves them up on the major portals like MSN.com (MSFT ) and Yahoo's main page. Web surfers whose cursors pass over these banners are served recipes featuring Kraft products. This feature enables Kraft to gauge the popularity of each food. Advertisers and agencies now monitor the performance of their online ads with so-called computer dashboards, which allow them to track their portfolios of ads. Like social scientists, they test ads against "placebos," usually a give-away ad for a charity such as the Red Cross. If one ad fares better than another against the placebo, they make adjustments on the fly.

by: www.businessweek.com