Banner Effectiveness

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Here’s What We’re Hearing About Banners

• “Click-through rates are plunging.”

• “There are more effective ways for marketing and branding online.”

• “Consumers aren’t paying attention anymore.”

• “Banners don’t work.”

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Here’s Some Things We’ve Heard In The Past

• “I think there is a world market for maybe five computers.” - Thomas Watson, IBM, 1943

• “We don’t like their sound, and guitar music is on the way out.” - Decca Recording Co. rejecting the Beatles, 1962

• “There is no reason anyone would want a computer in their home.” - Ken Olsen, CEO and founder of Digital Equipment Co., 1977

• “640K ought to be enough for anybody.” - Bill Gates, 1981

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Three Cruel TruthsAbout Why Banners

Don’t Work

1 Wrong placement

2 Weak offer

3 Dull creative

• Advertisers say: “But it’s not our fault, it’s the medium’s fault.” In other words, “kill the messenger.” (attribution theory)

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Five Reasons Why Response Rates Are Declining

• The novelty is gone.

• The increase in fragmentation and clutter– January 2000 - 1 billion Web pages, April 2001 - 4 billion*

• CPM-driven media buys often put the message in front of an inappropriate, non-receptive audience.

• Advertisers fail to maintain a consistent presence.

• Advertisers neglect opportunities to test offers and change creative execution.

* The Myers Report, March 21, 2001

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Why We Believe In Banners

• According to a February 22, 2001, Morgan Stanley Dean Witter report titled “Internet Direct Marketing & Advertising Services:”– “Banners exceed or are as good as magazines, newspapers

and television in generating brand recall and brand interest.”

– “When branding is considered in terms of cost effectiveness, banners look even better, based on our research. We estimate that banners are 40-80% better than TV, magazines, and newspapers in brand recall and generating interest in a brand.”

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Internet Leads In Brand Recall

• “In the area of recall, the Internet appears to lead magazines, newspapers, and television, in that order.” *

• Consumers studied showed a 27% greater ability to recall a brand after seeing an Internet ad than before.

• Magazines increased consumer brand recall by 26%.

• Television increased consumer brand recall by 17%.

* Internet Direct Marketing & Advertising Services, Morgan Stanley Dean Witter, February 22, 2001

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The Effectiveness of Banner Advertising

Metric Std.DeviationMean

Sources: AdRelevance, Dynamic Logic, 24/7 Media

Awareness 7% 0.18

Purchase Intent 2% 0.10

Recall 27% 0.15

Interest 44% 0.20

Perceived Clarity 63% 0.19

Message Association 20% 0.37

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Advertising Effectiveness Rankings

Branding Metric Ranking

Sources: Morgan Stanley Dean Witter, 24/7 Media, AdRelevance, ADVO, CableAdvertising Bureau, C.E. Hooper, Inc., Direct Marketing Association, Dynamic Logic, Media Dynamics, NCH, Magazine Advertising Bureau, Nielsen Media Research.

Generating Brand Awareness TelevisionMagazines

Banners

Generating Brand Recall BannersMagazines

NewspapersTelevision

Generating Product Interest TelevisionBanners, Magazines

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Cost-Effectiveness Rankings

Branding Metric Cost-Effectiveness Rankings

Sources: Morgan Stanley Dean Witter, 24/7 Media, AdRelevance, ADVO, CableAdvertising Bureau, C.E. Hooper, Inc., Direct Marketing Association, Dynamic Logic, Media Dynamics, NCH, Magazine Advertising Bureau, Nielsen Media Research.

Generating Brand Awareness MagazinesBanners (Effective CPM)

Television

Generating Brand Recall Banners (Effective CPM)Magazines

NewspapersTelevision

Generating Product Interest Banners (Effective CPM)MagazinesTelevision

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AOL/DMS Banner Effectiveness Study

• Key findings:• 37% of respondents recalled a banner ad.• Two-fifths of respondents who recalled seeing the

banner ad also read the ad.• More than one-quarter of respondents who recalled

seeing the banner ad would have clicked on the ad if it were possible.

• Respondents who noticed the banner ad typically describe it in positive terms (eye-catching, nice, interesting, informative).

Digital Marketing Services, March 2001

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AOL/DMS Banner Effectiveness Study

• How do consumers feel about online advertising?

• Eight in 10 respondents have a level of interaction with banner ads.

• Banner ads typically result in a follow-up action among one-half of respondents:

• Nearly one-third would visit the company website after seeing its banner ad.

• One-quarter would remember the company in the future after seeing its banner ad.

• One-third prefer online ads to TV ads.

Digital Marketing Services, March 2001

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Why We Believe In Banners

• AOL consistently sees well-executed creative coupled with strategic placement achieve 3X - 6X better click-throughs than the average on the Web and deliver excellent results (conversion rates, sales).– Examples later in this presentation.

• We see greater than a 90% rate of renewal from viable, major advertisers running banner campaigns.

• Banners are effective as reminders.– Up to 50% of all advertising dollars are invested for

reminding, not awareness, information, or persuasion.

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Six Advantages of Banners

• Creative is easy to update and change in real time.

• Real-time interactivity/transaction is possible with target consumers.

• Branding, direct response, and even sales are achievable within a single creative unit (something no other medium offers).

• Cost of production is negligible compared to radio, television, and print.

• Clutter is lower than on radio and, especially, TV.

• Banners are much less expensive than direct mail.

Source: eMarketer eAdvertising Report, June 2000

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Content Even Better for Branding

• Strategic sponsorships and other integration devices are effective for driving site traffic.

• Integrating advertising with editorial content delivers superior results.

Reasons for Visiting New Web Sites

0 0.1 0.2 0.3 0.4 0.5

As a result of banner ad-26%

As a result of content on a portal-47%

Source: NetSmartAmerica, 2000 , from eMarketer eAdvertising Report, June 2000

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Response Rates Vary

Response Rate Comparisons

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

eMail (Opt-in)-5.4%

Rich Media-3.4%

Web Banners-0.3

Direct Mail-1% -1.5%

Source: IAB, eMarketer, 2000 , from eMarketer eAdvertising Report, June 2000

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Banners Provide A Performance Measure Other Media Cannot Offer• “Nobody says a poster campaign was dreadful because 99

percent of the people who drive past it didn’t stop their car, read it and take the message in.” Barrie Cree, Zenith Interactive Solutions. *

• “If you take a print advertisement in a 96-page magazine, you have no idea how many people stop on the page and respond to your ad in some way. But if you got a 0.5 percent response from a magazine ad, you’d probably be quite happy.” *

• Banners are held to a higher standard than any other medium just because they are interactive -- because people can click on them.

* Financial Times, March 2, 2001, pg. 9

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“Focus on Click-through Is Misguided” *

• “Consumers who view an ad, but do not click-through, are more likely to buy or register at a site, than those who do click. It's a finding that vindicates industry players that have long stood behind the value of ad impressions, and calls into question the cost-per-click model.”– Key Finding: The study found that users who only viewed

a banner, but did not click, purchased or registered 33% more than users who actually clicked on a banner.

* Online Advertising Report by Engage's AdKnowledge 5/00 InternetNews.com InternetNews

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“Much-Abused Banner Gets a Respectful Nod” *

• “For low-involvement products that are not planned purchases, banner ads are just as effective as TV advertisements in driving short-term sales,” according to a recent Forrester Research study.

• The study showed when people were exposed to banner ads for impulse food products there was a direct connection between frequency and sales:– Sales increased when consumers were exposed to an

impulse food product banner ad at least seven times.

• Frequency doesn’t make any difference for planned-purchase items.

* Marty Beard, Media Life Magazine, October, 2000

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Clicks, Schmlicks. ROI Is What Counts

• “Click-through rates are good at measuring click-through and that’s about it.” - Patrick Keane, Jupiter Communications.

• “Click-through rates for one the Web’s top advertisers, NextCard, have fallen in a year from an average of 1.0% to about 0.5%, but customer acquisition costs have dropped to 25% of what they were a year ago due to a fine-tuned placement strategy and targeted creative.” - Loren Fox, Upside.com

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“Dot-Com Rarity: NextCard Finds Online Ads Work” *

• “…NextCard runs about 100 different banners ads at any one time out of its stock of about 2,000 designs.”

• “In a single month, its ads, on which it spends about $3 million a month, appear roughly 3 billion different times times on about 200 different Web sites.”

• “In a single year it conducts about 200,000 tests. That gives it200,000 opportunities to gauge, in as little as two weeks, what combination of design and Web-site positioning is most likely to produce a ‘click’…”

• NextCard not only examines clicks, but carefully examines cost-per-acquisition.

Wall Street Journal, January 29, 2001, Page B1

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Clicks, Schmlicks. What Counts Is ROI

• What is the conversion rate? What is the cost of customer acquisition?

• What is the lifetime value of a customer?

• How much money can you save by selling online?

• How can you get your online customers to buy more often and increase average order size?

• How valuable is having your customers’ e-mail address to send them seasonal promotional offers?

• The answers to these questions will tell you the value of a click.

How To Build Better Banners

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Steps to Success

• Direct Marketing– List

– Offer

– Creative

– Test, test, test, learn and improve

• Interactive Online– Placement

– Offer

– Creative

– Test, test, test, learn and improve

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How To Make Banners More Effective

Placement• Because of recency theory, placement should maximize

reach, not frequency.

• Because of receptivity theory and the thin market, placement should maximize reach and continuity for planned-purchase items (frequency matters for impulse-purchase items).

• Because of the AOL FOB’s enormous reach (78%), placement should maximize reach on the AOL FOBs.

• Because of AOL’s huge advantage in percentage of total time spent online (stickiness) -- AOL’s 32.3% to #2’s 7.0% --placement should maximize reach to limit banner burn-out and excessive frequency.

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How To Make Banners More Effective

Placement

• Placement should be in content areas where customers are likely to be the most receptive.

• Measures of success will vary by content editorial positioning, demographics, and type of message (branded/unbranded).– AOL Channels

– Chat/E-Mail

– Netscape, CompuServe, ICQ, AOL Anywhere, AIM, Spinner/Winamp, MovieFone, Mapquest, Digital City

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The Interactive Medium Doesn’t Work Alone

• Advertising, including online advertising, does not work in a vacuum.

• It works in concert with all other marketing communications: PR, publicity, data-base marketing, direct marketing, TV, radio, magazines, newspapers, and outdoor -- synergy.

• Interactive should be part of a carefully planned media mix and integrated marketing communications campaign.

– Interactive can be a surrogate for an entire media campaign. If the mix is working in TV, radio, magazines, then click-throughs online will increase.

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How To Make Banners More EffectiveOffer/Creative

• Before creating the banners:

– Define the perception/image you want to create.

– Ask if this product image and the messages are consistent across all types of communication (including consumer promotions).

– Define the key benefits for each product and each offer.

• Use these Power Rules for creating banners:

– Stopping Power: Get customer attention

– Holding Power: Generating interest in the product/offer

– Going-Away Power: Memorable promise

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How To Make Banners More Effective

• Run a wide variety of tests.– Pricing *

– Product mix

– Benefits

– Color/Size/Placement of banners

• Run variety of offers.– “Limited edition,” “Limited supply,” “Last time at this

price,” “Last time at this price.” **

* “Pricing Smarter on the Internet,” Harvard Business Review, February, 2001

** Ogilvy On Advertising, Vintage Books, 1983,“Direct Mail, My First Love and Secret Weapon.”

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How To Make Banners More Effective

• Make the message relevant to the customer. – Slice of life, price/savings (do most consumers know your

price now? If not, x% off will be a weak promise)

– “Free” is the number-one drawing card in banner advertising, “new” is next (if you don’t count “sex.”)

– Test the same message across all placements.

– Generally, limit a single creative’s exposure to two weeks in most areas, but one week in Chat.

• See Rotation guidelines later in this presentation.

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How To Make Banners More Effective

• Determine the Unique Selling Proposition (USP).– Emphasize the key benefit: simplicity, savings,

convenience, e.g.

• Focus on a single offer per banner.

• Develop targeted messages for specific audience segments, and, most important, for specific placements:– Mass consumer, Business, Women, Teens, etc.

– Multiple banners are a necessity.

• Use all of AOL’s limit of 8 creatives per week.

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0.41% CTR

1.83% CTR

5.30% CTR

What Works

•Interactive elements (pull-downs, input boxes and 3D buttons) invite the click

•A call to action (Go!, Search, Click Here) suitable to the context works best

•Copy & Design elements flow from left to right, top to bottom, leading the eye to the call to action.

•Short, simple, easy-to-read font; sans serif type.

•Text colors of blue, black, green, yellow.

•Neutral background colors (gray and white) or high contrast – allow copy to “pop” visually.

•Animation works.

How To Build Better BannersKeep the Medium in Mind

0.29% CTR

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Imps CT CTR

165,357 4,589 2.78%

165,440 4,081 2.47%

165,289 3,760 2.27%

148,008 3,158 2.13%

147,291 2,258 1.53%

Top 5 Top 5 Cendant 468 x 60 Banners on Cendant 468 x 60 Banners on CompuServeCompuServe

Interactive Design

Pull-downs, input boxes and 3D buttons invite the click

Examples

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Interactive DesignExamples

Building awareness, interest and intent, but less likely to be clicked

Imps CT CTR

143,376 559 0.39%

267,450 909 0.34%

88,882 299 0.34%

308,845 929 0.30%

94,442 257 0.27%

Lowest 5 Lowest 5 Cendant 468 x 60 Banners on CompuServeCendant 468 x 60 Banners on CompuServe

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Get Your .Net Address Today 0.17% CTR

How To Get A “WWW” Address 0.58% CTR

Copy ConsiderationsSpeak Your Customer’s Language

•Use a simple action statement (Search, Get, Find)

•Use “you” or “your”

•Address a personal need, fear or wish

•Use easily understood terms

•Create a sense of urgency

•NSI Text Link Comparison

–Get Your Own “WWW” A ddress .55% CTR

–Get Your Dot.Net Address Today .12% CTR

•Say “Free” if you can

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• Ask a Provocative Question

• Present a Problem (you can solve)

• Tease & Surprise

• Create a Sense of Urgency

Copy ConsiderationsChallenge and Provoke

Feel Fat? Printer in a jam?Printer in a jam?

How much sex is considered normal?

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Branding vs. Unbranding

One Example: Office Depot Test Banners On CompuServe

0.49 % Click-Thru RateWith Branding

0.72 % Click-Thru RateWithout Branding

Try Unbranded

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• Use animation to draw attention to the offer or action

– Don’t build on a busy background

• Use clean, simple background

– Avoid temptation to “just say more”

– The last frame must stand alone (and make sense)

– Blatant offer, subtle animation

– End after three loops

AnimationKeep It Simple

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Rich MediaLeverage the Medium

103,479 3.45%

332,513 4.00%

305,132 5.49%

HTML Average CTR: 2.24%GIF Average CTR: 0.35%

3,848,414 .54%

971,577 0.14%

13,281 0.30%

NSI Results: HTML outperformed GIF by >6x

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Cut Out Under Performers

Pruning

3. Drop lowest performers quickly to improve your average and efficiency

.45%.20%

.68%.90%

.32%.51%X

.51 % C T RA verage

.635 % C T RA verage

A 25% performance improvement in one stroke

4. Repeat Process for Best Results

X

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èSet click-thru targets (e.g., 1.5% CTR)

èEstablish click-thru minimum (e.g., .75%)

èPull and replace creatives before they fall below minimum

èTrack click-thru decline over time to identify needed refresh intervals

èRefresh frequently toavoid banner burnout

èRotate to revitalize CTR

RotatingDon’t Wait to Hit Bottom

Weeks

*

PotentialRefresh

Point

.25

0

.75

.5

1.25

1.5

1.0

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You Do Your Part, We’ll Do Ours

• An advertiser’s function is to craft and price an offer.– You do the offer and the creative…

• Our function is to encourage response.– We’ll place it where we know it works.

– No other medium can do that.

• TV can’t -- they place schedules based on demos, not response.

• AOL can place them according to consumer response.

• AOL is expert at getting results for partners.

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Any Questions?

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Will AOL Accept the New, Larger Banner Sizes?

• AOL’s success has always been based on putting the consumer--our members--first. We will consider different size and larger banners, but would only implement them if our members would welcome them. Our partners are currently getting good results from banners because we work very hard to accomplish this in the safe, convenient AOL environment where daily use is up to an all-time high of 70 minutes per day. AOL is unique and is not like Web sites and portals who might be having trouble getting results for advertisers.