Byline: Janet Ozzard

NEW YORK — They sparkle, they quiver, they flash. Banners are the most ubiquitous form of advertising on the Internet, but do they actually do anything?
To date, advertising on the Internet has consisted mainly of banner ads — the slim bars that pop up on many pages and, when clicked on, link the viewer to the product’s own home page. And for a while, the top Internet sites could name their price for banner placement, with rates from $15 to $30 per thousand viewers.
But as more consumers head onto the Web in search of products and information, ad executives are looking critically at the banner’s return on investment. Does it attract or alienate consumers? Does it even register with surfers? At the same time, costs are dropping drastically: while rate cards still have their standard fees, executives report deals are being cut for as low as $2 per thousand clicks, which will doubtless drive more advertisers online.
“There’s no question that as more and more people use the Internet to visit Web sites, advertising is going to increase,” said Charles Buchwalter, vice president of media research at AdRelevance in Seattle, Wash.
The issue is particularly important now, in light of NBCi’s statement Thursday that it will cut 150 positions, or 30 percent of its workforce, to reduce costs following a softening online advertising market. That followed Yahoo’s announcement last week that its full-year 2001 revenue and earnings will be significantly below estimates, which the browser attributed in part to a slowdown in Web advertising that is biting into ad income.
“The real question is, is the Internet for brand building or for direct response?” said Michael Kubin, co-chief executive officer of Leading Web Advertisers, an industry tracking company. “My own bias is that it is direct response. I like measured media, and if I spend $1,000 I want to know exactly what I’m getting back. On the other hand, banners account for over half the money that is spent on the Web.”
But are they effective? Some argue banners raise awareness simply because consumers see them over and over again.
Dave Moore, ceo of 24/7 Media, agrees, citing company data that says that 3 to 10 percent of visitors remember banners they have seen. “Just because somebody didn’t click when they saw the banner doesn’t mean they didn’t go back later.”
Others disagree. “I think banners are ambient noise,” said Scott Galloway, a founder of, who spoke at a National Retail Federation seminar here this week. “That’s why almost all our traditional brand building has been done offline.”
“You can’t brand online,” said Andrew S. Pakula, president and ceo of Orb Digital, an online marketing and advertising agency here that has proprietary tracking technology. “The Internet is a bumper sticker, and you can’t brand with a bumper sticker. Buy a 30-second spot on TV and we can talk about branding.” The Internet, he said, is for servicing the brand: building a foundation of loyal clients and keeping them informed.
“Email is the only way to go,” added Orb co-founder Laura Berland. If visitors are willing to fill out a site’s registration form — called “opting-in” — they’re demonstrating a degree of interest from the get-go, she said.
The targeted customer approach may cost a bit more, since it takes longer to build a data base. But in the long run, those customers stick around, said Elizabeth Talerman, ceo of Internet ad agency Agile Industries.
“If I’m working for a sports company and I run a promotion on sneakers, I may get a sale customer once,” she said. “But if I get to know a customer and his habits, and I send an email every three months reminding him to buy new running shoes, I’ve got a customer for life.”
The undisputed leader there, say executives, is Every Amazon user who registers is presented with his or her own unique home page; for example, a novel reader gets different content than a customer who habitually orders hip-hop CDs.
Amazon had a good pre-holiday strategy, said Buchwalter: it spent the summer months branding and then switched in the fourth quarter to a heavy promotional plan.
“Amazon is an unbelievably gratifying shopping experience,” said Steve Klein, founder of the agency IBalls. “The level of consumer customization is amazing.” Klein said this technology will be even more important when TV goes digital and viewers can program their entertainment individually.
There are ways to make existing Internet ads more appealing, said said Diane Silberstein, vice president, category sales, women’s and teens at Phase II Media.
Phase II did an ad on for beauty e-tail site called “Get this look” that featured a made-up model. Users could click on the ad and be taken immediately to Sephora’s checkout line — without navigating the site — where their basket would already contain the products that had been used on the model’s face.
While there’s no clear path for Internet advertising right now, say advertisers, the falling costs make it a good time for people to experiment with new ideas. And ultimately, said Moore, the market will level out.
“We had a tremendous spike last year, an unprecedented growth spurt,” he said. “But the fact is, new users are still coming online every day. And advertisers have to realize how to get their message in front of those folks.”

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