Are Banner Ads a Waste of Money?

A colleague of mine (David Sovka) wrote a blog post recently about what a waste of time and money banner ads are.  While Dave is a very smart guy and a way more entertaining writer than I’ll ever be, he totally misses the opportunity presented by banner advertising.

As someone who has (for the most part profitably) spent  millions of dollars of other people’s money on banner ads, I felt compelled to respond to the post.

First off, to make the general statement that banner ads are “stupid” or that “click-through rates are an appallingly low 0.1%” is like saying that the US is an obese nation. While, this may be statistically true, you’ll likely notice some striking exceptions the next time you visit the beach. Likewise, by being the exception as an advertiser, you can also stand out dramatically in the online ad environment.

Here’s a few places where banner ads work:

• In a well targeted environment where ads are delivered to people who have explicitly expressed an interest. For instance, I’m into cycling in a big way. If a banner ad for a mountain bike appears on a page, you can be guaranteed it will capture my attention. Even if I don’t click, the advertiser has gained a valuable branded impression.Speaking of branded impressions, if you do a good job with your ads, the low click-through rate can work in your favour as you can drive literally millions of targeted, branded impressions for very low cost (remember, with most banner ads you ONLY pay when someone clicks).
• In a well selected group of placements (web sites). For instance, I’ve personally seen banner ads drive a measured 100:1 customer spend:ad cost ratio. To be fair, this is a non-typical example. That said, the beauty of a scientific approach is that you CAN measure your results on an ad by ad, placement by placement basis and then adjust accordingly.
• Anywhere they replace print ads. This is, of course, a blanket statement with tons of exceptions. However, a high percentage of print advertisers would drive way better ROI by moving to a smart banner strategy.
• When they are part of a responsible “remarketing” program where they are displayed to folks who have visited your website in the past.

So, with all that stated, Dave is right about one thing: banner ad performance is generally horrible. However, the reason for this is not that the medium sucks, but that most advertisers take a lazy, non-strategic approach to banners which is unlikely to drive any meaningful results.

To that I say “great.” It simply makes it easier for disciplined, scientific marketers to stand out.