How Online Advertising Works: Lessons Learned

Too much wisdom about online advertising is anecdotal, fragmented, and inconsistent. We were therefore delighted by a presentation by Gian Fulgoni, CEO of comScore, last week at TechWeek in Chicago. As a founder of the company in 1999, Gian has learned a lot, and his ideas are backed up by data. Here are some highlights from his talk, which we are plagiarizing liberally. Please note that these comments relate to display advertising, not paid search.
The click is at best an incomplete measure of ad effectiveness, and at worst a misleading measure. There were 50% fewer clickers in 2009 than in July 2007, so clickers represent a small and declining segment of Internet users. Just 8% of all Internet users now account for 85% of all clicks. Therefore, optimizing advertising against clicks means ignoring 84 percent of Internet users.
Even with minimal clicks, digital advertising can lift both online and offline sales. Online advertising can be a brand building tool as well as a direct response vehicle. Despite click rates of only 0.1%, comScore research has shown that display ads can successfully lift retail sales – both online and offline. Exposure to display ads doesn’t just impact online sales. It also lifts store sales, and do so significantly. ComScore’s research shows the absolute dollar lift in offline sales is five times higher than the lift in e-commerce sales.
The internet has a significant opportunity to capture branding ad dollars. Digital advertisements in 2010 accounted for 34% of all media direct response spend, but digital branding accounted for only 6% of all media branding ad dollars. In particular, online viewing of video holds great promise for digital branding. A new audience is emerging and it watches content online, whether it is TV, movies, or other content. Time spent viewing video is now equivalent to 8% of TV viewing, so there is plenty of room to grow.
Cookies are a poor way to track campaign delivery. Many people delete cookies, typically through their anti-virus software. As a result, there is inflated reach but understated frequency as return visitors show up without cookies, thereby making it appear that they are first-time visitors. Many people tend to go to many of the same sites at home and work, thus appearing to be distinct users when they are in the fact the same person. Furthermore, many computers at home are shared among different people, and because cookies map to machines not people, when computers are shared, cookies cannot accurately identify who is using a computer at any given time.
It’s refreshing and informative to see some of the current realities of online advertising presented so simply and with supporting data. Here’s the link to Gian Fulgoni’s entire TechWeek presentation.

About Lee Greenhouse

Longtime strategy consultant focused on the business of information content, applications, and services.
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