Models
Used to Target Personalized Banner Ads
MKT 622 - Spring 2002
Dr. B. P. S.
Murthi
Group 3
Michael Hall
Hiba Hamati
Sajjad Hasan
Kendall Helfenbein
Introduction and
History
The discussion of the History of
Banner Ads should begin with a brief history of the Internet. The beginning of the Internet can be traced
back to 1961 at MIT when the idea of connecting all the computers in the world
using packets instead of circuits was born.[1] The MIT project was known as DARPA, which had
its origins in 1957 from the military’s ARPA “Advanced Research Projects
Agency”. ARPA was developed to
counteract the Soviets lead in the space race.[2] DARPA research led to the first "Wide
Area Network" ("WAN") in 1965 using regular telephone
lines. In 1966 separate research
projects (both military and non-military) came together to be called
ARPANET. The first two nodes were
connected in 1969 between UCLA and Stanford.
The
The original theory behind ARPANET
was that each of these networks would be independent in design and then be
connected together. This implementation
would allow the individual networks, as well as ARPANET, to grow on their own
without an overall plan.
The idea for the World Wide Web (“Web”) began in 1991 and was first demonstrated to the public in 1992.[4] The Web makes accessing information easy by clicking on links to other sites and makes documents, pictures, and sounds easy to publish. The ability to surf the net by simply clicking on links brings about information retrieval at an unprecedented level. In December 1991 there were 50 hosts worldwide, almost all of them universities. In 1992 there were over 1,000,000 hosts; in 1993 traffic on the net expands 3,400 times; in 1994 Pizza Hut begins to receive orders over the net; in 1995 government funding is no longer needed for the Web and in 1996 over 10,000,000 hosts were connected.[5] There were 16 million people on the web in 1995, 100 million in 1998 and 500 million in 2001.[6] These 500 million people only represent 8% of the world’s population, which means that there is still a huge growth potential on the Web.
The first banner ad went online in October 1994.[7] Advertisers were really excited because instant information could be gathered on “click through rates”. In the beginning of banner advertising, the mid 1990’s, these click through rates were around 10 percent. By 1997 this rate had dropped to 2 percent and in 2001 it had dropped further to 0.03 percent. The novelty of banner ads has apparently worn off; people have learned to ignore them. People have begun to see them as intrusive and have learned that they slow down the surfing experience. A good portion of the banner ads were not made well and did not lead to sites that provided any real value to surfers. Revenue for banner ads had dropped significantly because of these perceptions. Businesses needed a mechanism to better direct banner ads to the individual person viewing the page. Presenting a different banner ad to each person viewing the same page should not only increase the click through rates, but also increase brand awareness even if the surfer did not click on the ad. There was a great need for banner ads to be relevant, targeted, and interesting. From this need came the birth of personalized banner ads.
Major Players
Companies that are directly related to the Internet Banner advertisement business can be divided into two broad categories. First are companies that generate revenue by carrying the advertisement on their websites. Companies like Yahoo Inc, Amazon.com, About.com, etc. fall into this category. In fact, almost every website can generate revenue by carrying banners of other businesses and websites. The other category is comprised of those companies that generate revenues by selling Internet advertising and online marketing tools directly to other companies. We are going to focus mainly on companies in this category. There are many players in the in this arena. Some companies like DoubleClick and 24/7 Media are 100% in the Internet Advertising Industry. But it is very difficult to compare these companies with companies like WPP Group, Havas Advertising, and Lamar Advertising Company who are not only very old players in the traditional advertising arena but are also marginally involved the Internet advertising business. So our main focus will be the companies doing Internet Banner Advertising only. The major players in this category, according to their market capitalization are[8]
|
Company Name (Stock Symbol) |
Market Cap |
|
|
|
|
DoubleClick Inc. (DCLK) |
1.2B |
|
Modem Media, Inc. (MMPT) |
100.9M |
|
24/7 Real Media, Inc.
(TFSM) |
12.4M |
|
ValueClick, Inc. (VCLK) |
142.9M |
|
L90, Inc. (LNTYE) |
29.6M |
|
Jupiter Media Metrix Inc.
(JMXI) |
4.7M |
|
Engage, Inc. (ENGA) |
45.2M |
DoubleClick Inc.
DoubleClick Inc. is a major provider of products and services that enable direct marketers, publishers, advertisers, and agencies to market to consumers in the digital world. The company's products and services help its customers optimize their advertising and marketing campaigns on the Internet, and through other media. DoubleClick offers a broad range of technology, media, data, and research products and services to its customers to allow them to address all facets of the digital marketing process, from pre-campaign planning and testing to execution, measurement, and campaign refinements[9].
New York-based DoubleClick Inc. made its name as the leader in consumer online advertising. That business, however, has shriveled of late, and Kevin Ryan, DoubleClick's CEO, has led the company into new, and he hopes, more lucrative, ventures such as e-mail technology, direct marketing, and research. Such ventures make the b-to-b (business to business) arena much more important to DoubleClick, and Ryan knows it[10].
Modem Media, Inc.
Modem Media, Inc. is an Internet professional services firm focused on solving the marketing and customer management problems facing executives at companies most impacted by digital change. The Company leverages its experience in marketing and business strategy, creative design, and technology to deliver an integrated service offering that includes Customer Insight, Strategic Planning, Application Development, and Marketing Services[11].
24/7 Real
Media Inc.
24/7 Real Media, Inc. provides marketing and technology solutions to online marketers and Web publishers. 24/7 Real Media's products and services include: Internet ad serving technology, online media representation, integrated marketing solutions comprised of network and site specific advertising, email list management & brokerage, online promotions, and search engine optimization[12].
ValueClick,
Inc.
ValueClick, Inc. is a provider of performance-based Internet advertising solutions. For marketers seeking measurable results, the Company strives to provide the highest return on their advertising investment through a combination of performance-based pricing, advanced targeting capabilities, rigorous network quality control, and an integrated product line. Specifically, the Company provides online advertisers and publishers of websites advertising models known as cost-per-click, cost-per-action, and cost-per-lead[13].
L90, Inc.
L90,
Inc. is a provider of marketing services. The Company uses its proprietary
adMonitor technology and media expertise to provide companies with turn-key
solutions to close the marketing circle by helping them build brand names,
acquire new customers, increase traffic, drive sales, and grow customer
relationships[14].
Jupiter
Media Metrix Inc.
Jupiter Media Metrix Inc. is a global provider of comprehensive research and measurement products and services that analyze the impact of the Internet and new technologies on commerce and marketing. The Company's business units include Media Metrix, Jupiter Research, and Jupiter Events. Media Metrix offers clients a broad range of products and services that collect audience data and measure new media usage on the Internet, as well as other digital media. Jupiter Research provides business-to-business and business-to-consumer clients with strategic analysis and insights, including industry trends, forecasts and best practices, all backed by proprietary data[15].
Engage, Inc.
Engage, Inc. is a provider of content management software for multi-channel marketing that assists marketers, publishers, printers, direct mailers, websites, and agencies in improving the performance and efficiency of their marketing efforts across multiple forms of media[16].
Models
Banner ads (for a banner ad example see figure 1) attract prospective customers, but some prospects are better than others. A given banner on a given site may attract a high proportion of people who are seriously interested in a product, while another banner might attract mostly window-shoppers. Both the banner and the site on which the banner appears may influence this behavior. Banners that use better methods to induce people to click (for example, by simulating an error message, or by offering a free goodie) tend to attract idle surfers. Banners that provide facts about the product being advertised tend to attract more likely buyers. Overall, when a banner appears on a site, it's generally believed that the better the targeting, the higher the quality of the clickthroughs.
Targeting - The appropriateness of a particular site for a particular ad campaign has a huge effect on click rate. Good ad agencies devote a lot of effort to finding the best sites, and indeed the best sections of sites, for each individual campaign.
Reach - The more times each individual user sees a particular banner, the lower the click rate will be. For this reason, the total number of impressions bought on a particular site should represent only a small fraction of the site's total traffic. Different sites have different average numbers of pages seen by each unique visitor. This number is useful in calculating how many people see each banner.
Creative Quality - Ad companies refer to the banners themselves as "creative". Some banners are much better than others at generating click-through, often for unfathomable reasons. For this reason, a campaign usually starts out with several different banners. After a week or two, the banners with the lowest click rates are pulled out of rotation.
Creative Variety - It's well known that the click rate for any particular banner goes down steadily the longer the banner is up. To maximize clickthrough, banners should be rotated often.
So, the click rate for a banner, or for a campaign, is affected by various factors. Click rate can be a useful measure of effectiveness, but only when all the above factors are taken into account.
The major companies are trying their best to increase the effectiveness of their Internet Banner Advertising campaigns. They are coming up with innovative ideas to sell the concept of Internet advertising to their clients. Some of the methods used by these companies are:[18]
Regular Old
Banner Ads
Well-done banner ad campaigns will continue to be the staple of Internet advertising for the immediate future. Studies show banners are not effective enough at generating traffic click-throughs, but have a powerful branding effect. Matching site content to banner ad subject can certainly increase their power. Selecting a banner to display based on the observed personal preferences and interests of a visitor can be a hugely powerful sales tool. The potential for rich, media enhanced, targeted banners is tremendous.
Interstitials
Interstitial means a relatively small or narrow space, between things;
a narrow opening, chink, or crevice[19]. On the Web, interstial ads are usually pages
or a variety of pop-up boxes that appear after you click on a link but before
you get to the place you clicked to get to. An interstitial page might open and
close automatically. These can be highly effective if well designed. Al ternatively, they can be
quite annoying if improperly placed or haphazardly designed. Interstials can be
quite profitably timed to appear during file downloads. If they are interesting they will remain on
screen for far longer than the usual banner so the CPM should be quite high.
Rich Media
Right now this term seems to mean a more-or-less normal-sized banner ad
that uses Java, HTML, or what have you to make the ad have active content such
as drop-down boxes, etc. for a greater degree of interaction. Some ad serving
software programs serve rich media and it is a must-have if you want to sell
ads to some of the more switched-on companies. Both visitors and sites like
them because you don’t have to actually leave the site to interact with the
banner. Click rates while using Rich Media can be quite high.
Keyword Advertising
Keyword advertising can be quite effective. What you do is pay a search
engine, directory, or site to have your ad or link to your site pop up first
when someone does a search on the keywords that you buy. When someone does a
search using the word, your content comes up on top of the list and/or your
banner ad is at the top of the page. The best words like ‘sex’ and ‘books’ are
going to be sold out or very expensive. The less-searched on words can be
cheaper but can still bring a very valuable targeted person to your site.
Coupon Deals
Digital coupons that give you special deals for e-commerce purchases or
printable coupons avail the advertiser of the opportunity to do all the
wonderful and horrible things traditionally possible with coupons, but now you
can do it on the Web.
Pay Per Click or Pay Per Sale
Companies buying ads now like to get a bit more secure return on their
investment. There is pressure for sites to run ads and be paid a bit more than
usual but only when someone actually clicks on the banner or makes a purchase
as a result of the click-through. Such
deals are fine for the companies buying the ads but do not tend to pay off well
for the advertising sites.
These “Pay Per” programs work only because so many sites are starved for any ad income at all. They’ll go for anything. But having these types of ads at the top of your pages puts you into a lower tier quality of site. Advertising buyers know the ads when they see them.
Ad Auction
Ad auction networks auction chunk or bundles of
networked ad inventory. Some basically conduct an auction of space submitted by
sites and then let buyer and seller worry about banner delivery, serving, etc.
- they just handle the money. Other
auction networks let you put ad-serving code on as many of your pages as you
like as do many other sites. The
inventory from all the sites is then auctioned off in blocks and ads served
equally to all. The money is split up
according to how many ads each site actually serves. These networks could potentially develop into
something quite interesting for the Web ad business. But presently neither of these Ad Auction
models is paying very much money to sites.
Issues
Privacy
Privacy
is a big issue right now and is getting big media attention. Internet advertisers have been a target for
every online and offline organization concerned about privacy and have had
several lawsuits emerge against them.
Analysts say Internet advertisers erred in exploiting the Internet's
undefined space and making information public that Internet users assumed was
private. Much of the current privacy debate
is based on consumer ignorance of such technical issues as how browser cookies
work.
Consumer uneasiness about how gathered information may be handled and sold is at an all-time high. According to an Odyssey poll, 59 percent of online household heads "strongly distrust companies’ ability or intention to keep personal information confidential, regardless of the policies the companies have in place." According to Clayton, CEO of Privacy Council, “businesses should get proactive and propose privacy laws they can live with" before the government goes ahead with legislation that may not be so friendly[20].
To avoid the privacy pitfall, businesses should give consumers some benefit, like sales or coupons, for the information they request. Online businesses need to respect customers’ private information and give the customer control over that information. As people buy more online, the data needed to target ads will be very specific. In order to collect that information, businesses will first have to establish trust.
Shrinking Revenues of Banner Advertising Companies
There's some evidence that online advertising is growing less effective. Banner ads in the late 1990s, for example, were generating response rates of between 3% and 5%[21]. Today, consumers virtually ignore them. The doubts are reflected in the numbers. Though Internet use, measured by the number of minutes people spend online, has grown 150% since 1999, growth in Internet advertising is not keeping pace. Growth in online advertising slowed to only 5.3% between 2000 and 2001, according to Jupiter Media Metrix.
This slow growth rate and Internet advertising revenue shrinkage does not bode well for companies like DoubleClick. More than 75% of the company's revenues still come directly from Internet advertising services, primarily providing ad technology and selling ads.
Accuracy of Data
Measuring actual
eyeballs on the Web is tricky. It’s more
of an art than a science, but anyone spending money buying Web ads wants to make
sure the ads are really getting seen by as many people as the sites say are
seeing them. Of course, sites selling the ads want to make sure they get paid
every time someone is served a banner ad.
Standard measurement protocols are still in the emerging phase.
Al ternatives to Banner
Ads
With the creation of software equipped to block banner ads, the search for alternatives has become an important, if not necessary, task for businesses advertising on the Internet. It would not be prudent for companies to waste advertising dollars on banner ads that will be promptly removed before the user even has a chance to see them. Even though the click-through rate on banner ads has declined in recent years, there is still value gained from a website user seeing a banner even if he/she does not click on it. Simply seeing the ad increases brand recognition and awareness of a product or service.
Online games
With so many users, online games are the newest way for marketers to reach their target audiences. Large companies such as GM, PepsiCo, and Ford Motor Company turn to online games as a viable marketing outlet since to them, banner ads are no longer worth the investment. Marketers are attracted to this advertising outlet given the promising demographics. According to the Interactive Digital Software Association, approximately 145 million people play computer and video games. Online games attracted some 35.1 million players last year, and Jupiter Media Metrix projects that total will grow to 104.9 million by 2005.[22]
Skyscraper ads
These new modified versions of the traditional banner ad are tall and
skinny and can be found along the sides of a web page, rather than across the
top. Studies commissioned by the
Internet Advertising Bureau and two of its members, MSN and DoubleClick, found
that new, larger ads, known as Interactive Marketing Units (IMUs), improve key
branding metrics by 40 percent on average.[23] These findings helped propel skyscraper ads’
popularity. Figure 2 shows the
increasing popularity of the skyscraper ads since their inception. This increasing popularity can be attributed
to the results that skyscraper ads bring.
The DoubleClick study found that traditional banner ads boost brand
awareness by 56 percent while larger ads boost those measures 86 percent.[24]
Sponsorships
With sponsorships, a sponsor supplies a product or service to a website that will personally recommend the sponsor’s offering to its users and/or visitors with the sponsor paying a fee to the website owner. Since sponsorships involve a personal recommendation, a website would need to thoroughly research its partner before fully endorsing its products. If a website endorses a sponsor’s product that falls well below expectations, then the website users are going to change their perceptions of the website leading to a loss of a certain amount of user trust and loyalty. The value in a personal recommendation/sponsorship hinges on the fact that your visitors will take your personal recommendation more often than they would the recommendation of a banner ad to “Click Here Now!”[25]
Sponsored
Links
Sponsored
links appear to be the most effective alternative both in terms of cost and
click-through rates. These text-based advertisements have proven to be popular
with users, as well as offering advertisers attractive, low-cost, self-service
alternatives to banners.[26] Google, a popular search engine, was the
first to use this concept when it launched its AdWords Program in late
2000. It works by first having an online marketer
select keywords and phrases that reflect his/her target audience. When Google users search for one of these
terms, the online marketer's short, text-based ads are displayed on the right
side of Google's results page.[27] So how do the click through rates compare
with those of regular banner ads? While
click through rates (CTR) for 468x60 banners have dropped to the current
industry average of 0.2%, AdWords on Google have average CTRs of more than
2.0%.[28] Sponsored links not only provide higher CTRs
than traditional banner ads (in some instances companies could achieve a CTR as
high as 10%), but they also cost significantly less. At prices ranging from $8 to $15 per thousand
impressions, AdWords are so cheap that e-marketers can test a variety of
keywords and phrases to see which work best.[29]
The
relatively low cost of sponsored links makes them an appealing choice for
Internet advertisers, but how do Internet users feel about their presence? As stated above, the sponsored links are popular
among users, but how do they compare with other forms of online
advertising? A 1999 IntelliQuest study
measured the desirability of various types of Internet advertising. The study asked college students, faculty and
administrators to rate how desirable or undesirable they found different types
of Web advertising, and more than 600 respondents rated sponsored links as the most
desirable and full banners as the most undesirable Web advertising format.[30] Many respondents likened the sponsored links to
the Yellow Pages and likened the banner ads to intrusive telemarketers.
Conclusion
The
Internet has come a very long way since its inception all those years ago. Now a user can sit in an office, home, or
library virtually anywhere in the world and find the latest stock quotes, read
an online book, or shop for a new television. Users can communicate in various
ways with colleagues, family members, or friends over the Internet, learn to
landscape their home, or keep up with the current political affairs in foreign
countries. The possibilities with this
kind of real-time connection are endless.
Even though the Internet has been around, at least in some form, since
1961, most of the advances in technology and ideology have come about in the
last decade or less. We are merely in
the infant, or maybe toddler, stage of the Internet and its future
capabilities, uses, and overall development.
This means that we have yet to figure out what to do with this behemoth
of responsibility and freedom all bundled into the communication lines of the
Internet. Surely we will learn how to
manage it, use it efficiently, and even someday we will certainly learn what
the most effective advertising methods of the Internet are. This process of learning is constant and
obvious.
We
will learn. Banner ads have served a
purpose in the past, but what about the future?
In the beginning, banner ads seemed like the most prudent choice when it
came to online marketing. However, now
that the click-through rates have slowed down significantly, companies have
become reluctant to invest in them.
Figure 1
Figure 2
http://www.adrelevance.com/intelligence/intel_snapshot.jsp?pr=010618
(source for Figure 2)