Click-throughs and ROI? Get your facts straight
When God created ad banners, He also created the click-through rate (CTR), the holy measurement grail of online advertising. Today, as the industry watches click-through rates plummet to 0.5 percent, marketers are once again wondering, “Where is the return on investment in online advertising?”
Despite the Internet’s promise of accountability and instant optimization, a panicked industry has abandoned click-throughs in search of other merits, like branding or transaction rates. Hello? Last time I checked, you still needed to respond to an ad before actually going on to buy the product.
So why have ad-banner response rates taken a nosedive? Theories abound. Some say the sheer number of ads is now so large that consumers “don’t see them” anymore. Others attribute the high CTRs of the past to the “gee-whiz” factor of a new medium. I heard my favorite the other day–bands of anti-corporate Web surfers are taping 10-inch cardboard strips over the top of their monitors. Ouch.
Now, I’m not arguing with any of these hypotheses. But my question is–who cares? The real problem with click-through rates is that the math is wrong.
Click-throughs were the online world’s response to marketers’ early demands for information about the performance of their advertising. Attempting to meet advertisers’ ROI needs, and also “prove the medium,” early Internet publishers lifted a simple calculation from the direct-response industry. They counted the number of clicks that each banner received and divided that by the number of ads “delivered to” consumers, or impressions.
With CTR, advertisers had more ROI data than they’d ever had before and publishers were armed with proof of the medium’s effectiveness. It was a win-win for everyone, which is probably why nobody bothered to check the math.
The first thing that advertisers and their agencies must do is toss their current CTR numbers and look at how many unique people are “reached” by a campaign. Without knowing exactly how many individuals saw your advertising, how could you possibly know the effectiveness of your ads?
Most media properties and networks report the CTR of each ad banner, button or link in a campaign, but do not take into account the notion of recipients, or people reached. To calculate the actual reach of your online advertising, you must utilize a third-party ad server, like DoubleClick, AdForce or AdKnowledge, to centrally serve the ads on the media properties instead of relying on the sites to serve the banners themselves. With a third-party ad server, a single-cookie ID scheme is used to tag all users who either see or click on the ads in your campaign.
If you’re not using a proper CTR calculation, take a step back and reconsider. You are probably making key decisions on bad information. Once your ad response is measured by looking at the facts, not impressions, you can make informed decisions about your advertising, including mid-campaign optimization, and increase the ROI of your online marketing. K