Paid Search Killed the Banner

The would-be fate of banners has been the subject of much conjecture from industry soothsayers for as long as I can remember. However, any online marketing professional worth his salt will tell you the search banner is an effective format, particularly when creative is married to user-initiated results.

Pay-for-placement (Google, Ah-ha), paid inclusion (LookSmart, Inktomi), along with other new ad formats appear to be sucking the life out of revenue generated by the banner. Reports from Pricewaterhouse Coopers and Salomon Smith Barney relating to format spending and search site earnings show a decline in banner expenditures, site earnings, and increased ad spending in the “other” category with triple-digit percentage spending increases in keyword search.

Rumors are even floating around that while Yahoo is rediscovering itself as a portal, it may be planning to retire the famed north banner. Sniffle. Why remove an ad format that advertisers seem to gleefully pay as much as a 40% premium? Before I burst into a chorus of “Video Killed the Radio Star”, let’s take a look at yesterday and most importantly today, in search results ad formats.

The Good Old Days

Internet advertising had begun to travel down the birth canal by the mid 1990s. In ’94 America Online, the nations leading Internet service provider, halted marketing plans and expanded service offerings to fix service problems caused as the service became overwhelmed by its now 600,000 subscriber base.

Chrysler began to embrace the online medium with a test for measuring recall of Superbowl ads. Saatchi and Saatchi announced the formation of a new division called Saatchi Interactive. Trade rags containing “Interactive News” depicted agency people in new age “workspaces” instead of the traditional office/pod setup and there were many stories depicting the new “Interactive TV” that would take over the world by 2000.

Two years later in 1996, this really neat search site, Yahoo! had caught on and planned to go public, touting keyword-based advertising was worth a whopping 30% more than other types of advertising on the site. For many advertisers, there were only banners and people clicked on them more often.

September 1997—a search site initiated a yellow pages style format on which (almost exclusively) small business advertisers paid for keyword-driven listings on a cost-per-click basis. The name seemed an oxymoron, since relative to behemoths like Yahoo!, few people appeared to be visiting the site.

Almost as if someone had shouted “iceberg” on the good ship Banner, click rates sank into the deep, cold waters of poor behavioral response. Portals, search, and destination sites began developing new ad formats to compensate for the sub-zero reality of needing additional revenue resources. Mad-cool ad formats like the Skyscraper were developed in an attempt to generate greater behavioral response, but users easily identified new ads as such, preferring to click on informational, “sponsored listings”.

Ten Internet minutes later, the yellow pages pay-per-click model, which so few would “GoTo”, started to make sense. Now known as Overture, the underdog became the leader in paid search by syndicating its listings to sites like Yahoo!, which brings us to the “Live in the now” portion of our story.

Perspicacity

The October, 2002 IAB/Pricewaterhouse Coopers report on U.S. Online advertising spending offered some interesting search format spending trend information. 2002 search spending ranked three percentage points lower than the “Other” category at 9% while banner spending checked in at a robust 32%. The little bundle of joy arrives when you compare 2002 to 2001 spending in which banner expenditures fell from 36% and keyword search tripled from 3%.

“The keyword search spending figure is not restricted to paid search listings”, reports Peter Petrusky of Pricewaterhouse Coopers. “However, the exponential growth in percentage of keyword search spending can most aptly be attributed to increased popularity of paid search providers such as Google, and Overture.” Color me not surprised.

Further, predictions from Salomon Smith Barney indicate a 10% overall decline in ad revenue from existing search ad formats from 2004 to 2008. Salomon showed a 12 to 6% drop in non-listing ad formats and a 39 to 26% drop in paid search listings. The drop on both ends is significant, but one can’t ignore how close the non-listing number (the majority of which is mostly banners) is getting to a doughnut.

Clearly, search providers will need to expand their keyword ad unit formats beyond paid search results thereby showing shareholders the money with something other than the once coveted banner.

Flying Cars

Remember that “other” category I mentioned? It seems a few search results ad formats would fit into this group. On a recent trip to the city of my birth, I hunted around Gotham for fourth dimensional search results marketing opportunities.

InfoSpace, Inc. owns Excite.Com, Metacrawler and Dogpile, among other sites. New York Senior Account Executive Jeramie Wright showed me their Keyword Integrated ad Unit (K.I.U.) that incorporates into search results multiple direct-to-content “sponsored” links placed in lieu of a banner. InfoSpace has been running comparative analysis on this ad unit since it was developed nearly two years ago, placing it at odds with the traditional search banner. The average behavioral response rate on the K.I.U.s was nearly 12%, while banners running against the same keywords checked in at only .5%. Jeramie attributes the higher response rates to a more efficient user experience created by the ad unit with multiple content links. This type of format appears to be catching on—as I was searching around that afternoon, I noticed a similar format in Lycos’ search results.

Great examples of next generation ad formats exist in performance- and impression-based pricing structures on MSN and Ask Jeeves as well. Since most advertisers can afford the minimum purchase amount for Ask, let’s take a look at them. Ask has developed its own pay-per-click search results listing format that exists above the Google AdWords listings and, above that another interesting ad vehicle. Ask Jeeves refers to this as a branded response ad unit. Once again, in the absence of a banner these ad units perform at much higher than average click rates.

Denouement

All of these formats-- tried and true initiatives like paid inclusion, and pay-for-placement -- combined with K.I.U and its ilk, are creating a new search marketing strategic execution I like to call T.S.M. (Total Search Marketing). So, rather than mourn the death of the search banner, I’d rather celebrate the success of these “other” formats and what promises to be a great future for search results marketing. Like Mom, apple pie and Old Glory, the infinite joy found in executing a successful total search marketing plan makes you want to stand up and thank the deity for all that is good and right in the world.

About the author: Kevin Ryan is a freelance contributor whose current and former client roster reads like a “who’s who” in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. He currently is Director Market Development and leads the Western U.S. division of IPG’s Wahlstrom Interactive where he provides guidance in directional online marketing to Wahlstrom’s prestigious list of clients and sister agency brands.

 

Comments