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Are Banner Ads Still an Effective Form of Internet Advertising?

on 18 Dec  Posted by Admin  Category: Site Promotion  

by Justin Michie
http://www.internetmarketingbook.com

Banner ads are the pioneers of internet marketing. The first banner ad appeared on www.hotwired.com (now www.wired.com) back in October 27th, 1994 in the form of an ad for AT&T. Since that time banner ads have taken over the internet in a variety of forms.

A banner ad is a graphical promotion used on websites as a form of advertisement. Banner ads can come in any size you want, however the accepted standard is 468 pixels wide by 60 pixels high. Due to the widespread acceptance of this size, the same banner ad can be used on most websites without having to reconfigure the size and layout. Although banner ads can be used to advertise your phone number, address, or anything else you like, the real purpose behind banner ads is to get someone to click on it and jump to your website.

There is a great deal of controversy about the effectiveness of banners. Some people swear by them, others swear at them, saying they don't work worth a darn. Although click-through rates have gone consistently downward, the same can be said of banner ad prices. The average click-through rate hovers somewhere around 0.5% range for banner ads. But, with a good banner design and placement it is still possible to achieve a good return on investment, by combining below-average ad rates and above-average response rates.

Banner ads are sold in any one of three ways: cost per 1,000 impressions (CPM), pay per click (PPC), or pay per action (PPA).

Buying a PPC banner is usually more expensive than the CPM basis, but can be much more effective because people actually take some kind of action by clicking though to your site. One of the drawbacks to PPC banner advertising is that one person may click on an ad more than once and you get charged for each click. However some ad providers track IP address, and only charge one click per computer per day. Most places though don't do this for the simple reason that it means less money in their pocket.

The effectiveness of cost per impression banners can vary quite a bit, depending upon their placement on the webpage and you typically (not always) pay the same whether the banner is displayed prominently at the top of the page, or hidden in a bottom corner. Most CPM banner sites rotate the banners throughout the site (Run of Site - ROS) and throughout the page. Banner ads to reach general audiences are typically priced at $1 to $10 CPM, while targeted sites may get CPM rates of $30 - $50 or more. Even though it may not seem like much, banner ads can be quite expensive. Do the math with me:

If you're paying $10 CPM and the click-through rate is an industry average of 0.5%, then it costs you $10 to get 5 people to your site, or $2 per person. If 2% of the visitors to your site make a purchase, then your customer acquisition cost (CAC) is $100, ($2 / 2%). That means for every transaction you do you need to pay out $100 in advertising fees. Some websites don't even manage to convert 2% of visitors into customers, especially when they originate from a banner ad.

In order for banner ads to be effective, you need to combine above average click-through rates, with below average banner prices and sell either a high-ticket product, a product with a high markup (like an info product) or have a strong back-end in place so you make money on the second, third, fourth and even twentieth sale.

Pay per action banners are usually the most expensive, since you pay only for a desired action. This can be a product sale, having someone sign up for an email list or any other action you want. PPA banners can be very similar to an affiliate program and use the same type of tracking.

Banner Exchanges

Just like link swapping, some companies have banner swapping programs. Most banner swapping programs are free and some might require you to pay a monthly administration fee so they can cover their costs.

Many of the free companies make money by the in-proportionate ratio of banners y