Is the End Near for Display Ads?

NEW YORK Digital media buyers have been trying to kill the banner ad for years. Now, it appears, the recession might just finish the job for them.

Web publishers and agency executives said they are under growing pressure to prove the value of online display advertising, as the deepening economic crisis forces CMOs to scrutinize every line of their marketing budgets.

Since brand advertising on the Internet has never really developed solid measurement standards, its ROI value is often seen as superfluous when compared to performance-based ads. Thus, it often is the first line to go when budget cuts come. Some industry experts go so far as to predict that a severe ad recession will result in a complete rethinking of how image-based brands — the Coca-Colas, McDonald’s and Cloroxes of the world — approach online advertising.

Some industry veterans argue that the greatest handicap of display ads is their long-held reputation as bland. Whether traditional banner ads, skyscrapers or 350×200 rich media units, Web ads are eminently ignorable, and rarely move one to laugh or cry.

“There is still a school of thought that it is a low-impact ad environment,” said eMarketer analyst David Hallerman. “With money tightening, people say, ‘How effective is it?’”

Greg March, digital group director at Wieden + Kennedy, put it more bluntly. “Internet ads are small and out of the way,” he said. “Advertisers want to deliver impact, and I don’t think the impact for these ads is always that strong.”

Even those who said they believe in the power of display advertising acknowledged the industry faces a major challenge in proving its worth, particularly as bottom-line-obsessed CMOs fixate on click-through rates for banners that rarely approach 1 percent.

“It continues to be an ongoing problem  from the beginning that the Web has overpromised its trackability, and the wrong metrics are often used,” said Hallerman.

Yet, as digital ad spending swelled by more than 20 percent over the past couple of years  and many traditional brands started doing significant business online for the first time, few fretted over how to best measure the brand impact of display ads beyond the occasional Dynamic Logic survey. Now, the heat is on for many publishers, who are seeing campaigns that appear on their sites getting compared to easy-to-evaluate direct-response efforts.

“It’s really the question of brand versus direct response,” said Vivek Shah, group digital president at Time Inc., who recently characterized display advertising as being “under assault.” Said Shah: “In times like this, the balance can tilt towards direct. That’s a challenge for traditional content sites that rely on display ads.”

Jim Spanfeller, CEO of Forbes.com, said that as more traditional brands have experimented with performance-based ad networks in recent years, they’ve become intoxicated with their ability to deliver measurable and automatically optimizable results. “Ad networks have pushed the focus back on [cost per click],” he said.

Spanfeller, who believes that sort of thinking devalues brand advertising, is a big advocate of better research. “As marketing dollars become more limited, we’ve got to figure this out,” he said.

Last week, comScore announced an effort to help figure out those issues. Its new Brand Metrix database pulls together data from 200 brand impact studies, aimed at helping better gauge ad effectiveness.

And many advertisers lately have turned to Microsoft’s Atlas. Earlier this year, the DoubleClick rival announced the launch of its Engagement Mapping product, which promises to help buyers to more holistically measure the impact of online ad campaigns, allocating credit to every single ad a user encounters, not just the ones they click on.

Young-Bean Song, senior director at Atlas Institute, said that since the economy went south, “we’ve been getting new subscribers every day. In this environment, people are paying a lot more attention to measuring the real impact of their campaigns.”