Banner ads, nearly given up for dead, are showing new life thanks to developments in the display ad business that could close the gap between ad spending on search and display ads.
Despite the plethora of banner inventory, marketers have been earmarking more of their Web budgets to search since it has better return on investment. Research firm eMarketer estimates that U.S. advertisers spent $11 billion on search ads in 2009, compared with less than $5 billion on display ads.
But the rise of automated, real-time exchanges -- which collect data used to fine-tune ads based on targeted audiences -- are showing returns that rival search, according to some marketers.
Daphne Liska, senior manager of display and paid search advertising at eBay, told a gathering on Feb. 4 in New York, sponsored by ad exchange AdMeld, that eBay is moving money out of its search budget to earmark for display ads bought through these exchanges. Combined with eBay's own consumer data, it can find likely customers across the Web. "It's a way to try these sites," she said.
Sean Cheyney, vp of marketing and business development at AccuQuote, added that he's found real-time bidding sometimes performs as well as search.
Real-time bidding is a key part of the rise of data-fueled advertising exchanges like Google's DoubleClick Ad Exchange, Yahoo's RightMedia and yield optimizers like PubMatic, the Rubicon Project and AdMeld. (Microsoft is expected to enter the arena with the relaunch of the AdECN exchange.) On the agency and advertiser side, demand-side platforms allow them to efficiently access these inventory sources to purchase space based on who they want to reach.
The field is still nascent, according to Forrester Research analyst Emily Riley, and used mostly for direct-response advertising. Yet the online advertising system as it stands today, by all accounts, is broken, she said; there is far more inventory than demand, leading to low prices, and agencies struggle with a mostly handcrafted process when executing buys. For those reasons, Forrester anticipates 30 percent of online advertising will flow through such systems by the end of 2010. "Everybody needs efficiency today," Riley said at the conference.
Forrester anticipates display advertising will grow at an average rate of 17 percent to reach $17 billion in 2014. For it to get there, the market needs a more efficient way to execute ad buying, such as real-time bidding. Today, publishers typically sell about half of their inventory (or less) and distribute the rest through third-party ad networks. The drawback is that the secondary market driven by ad networks aren't transparent, Riley said.
For agencies and publishers, the new system means search-like bidding systems coming to banner buys. Agencies are setting up demand-side platforms like Interpublic Group's Cadreon in order to make these kind of buys, while some advertisers like eBay have built their own.
For now, real-time bidding systems are in their infancy, according to Darren Herman, chief digital media officer at Kirshenbaum Bond Senecal + Partners and founder of MDC Partners' demand-side platform, Varick Media Management.
"It's still a story," he said. "I'm waiting for the next chapter."