With Display Ad Clicks in Freefall, What’s the Future of Online Advertising?

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(image from Sérgio Rodrigo)

Last week, news was released that for the first time, the UK has become the first major economy where advertisers spent more on internet advertising than on television advertising. As explained in the Wall Street Journal:

“Internet advertising sales rose 4.6% on the year in the first half to £1.75 billion ($2.78 billion), giving it a market share of 23.5%. TV advertising fell 16.1% to £1.64 billion, dropping into second place with a 21.9% market share, the research showed.”

While this sounds like great news for online publishers, another story was released the day before this one that put a damper on the news for many publishers. Comscore released a new report, titled “comScore and Starcom USA Release Updated “Natural Born Clickers” Study Showing 50 Percent Drop in Number of U.S. Internet Users Who Click on Display Ads.” As explained in the report:

The collaborative studies focus on an understanding of how U.S. Internet users click on display ads. The updated results based on March 2009 comScore data, and presented by comScore chairman Gian Fulgoni and Kim McCarthy, manager, Research & Analytics at Starcom, at the iMedia Brand Summit in San Diego on September 14, 2009, indicated that the number of people who click on display ads in a month has fallen from 32 percent of Internet users in July 2007 to only 16 percent in March 2009, with an even smaller core of people (representing 8 percent of the Internet user base) accounting for the vast majority (85 percent) of all clicks.

The original research, conducted using July 2007 comScore data, showed that 32 percent of Internet users clicked on at least one display ad during the month. These clickers were segmented into Heavy, Moderate and Light Clicking segments based on the group of users accounting for the top 50 percent of clicks (heavy), middle 30 percent (moderate), and bottom 20 percent (light). In 2007, comScore, Starcom and Tacoda found that heavy clickers represented 6 percent of U.S. Internet users, moderate clickers accounted for 10 percent and light clickers accounted for 16 percent. By March 2009, those numbers had dropped substantially in each case, to 4 percent of Internet users for heavy clickers, 4 percent for moderate clickers and 8 percent for light clickers.

So, what does this mean for online publishers? While it may seem like the sky is falling at first, that’s simply not the case. Instead, it has much more to do with click-throughs not being the end-all, be-all to measuring the effectiveness of online advertising.

Since click-throughs aren’t the holy grail of online advertising, you are probably wondering what is. Unfortunately, there doesn’t seem to be an answer to this question. However, that doesn’t mean that people aren’t thinking about this issue. In a recent TechCrunch post (which was arguing that CPM is a metric that needs to go away), Shelby Bonnie made the following suggestions (which also apply to the CPC metric):

“First, just stop using the CPM. Yes, it will break every model and process that the industry holds dear, but we need to get rid of the crutch. The ensuing turmoil will bring creative thinking, new ideas, and entrepreneurial passion.

Let it be a movement, not a task force or sub-committee. Create room and dollars for entrepreneurs to experiment and try new things. They all might not work, but we will collectively learn. A bunch of task forces by industry associations will only make it worse.

Think open source. This should not be proprietary or an individual company’s technology, it needs to be an effort on everyone’s part to do this together with the benefit accruing to us all.

Realize that we all share a common need to fix this. The fight is with the system, not each other.”

In your opinion, what kind of metrics should advertisers and publishers be focusing on instead of CPC and CPM?

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