May 27, 2010, 12:29 PM

Out with the old

New ideas light up online display ads, bringing gee-whiz to a ho-hum marketing format.

Bill Siwicki

Managing Editor, Mobile Commerce

“Traditional online display advertising is dead.”

So says Eric McCoy, founder and CEO of Heels.com, and quite a few of his retailer colleagues. McCoy means that in a good way, because display ads have forever been the black sheep of the online marketing family, rarely producing the desired results and always getting far fewer dollars than search engine, e-mail and other forms of marketing.

Results like this could lead retailers to take another look: a 379% return on ad spend improvement over previous display advertising campaigns, a return just 3% less than that of paid search.

Heels.com achieved those results with a recent campaign it conducted using a new online display advertising technique. The e-retailer belongs to a co-op launched in September by ad network and technology provider Permuto Inc. in which hundreds of content sites, retailers and consumer brand manufacturers volunteer their web site visitor activity data, made anonymous. Permuto combines the data into a Buyer Index, a collection of 40 million cookies that can pinpoint an Internet user’s interests and thus, the company says, what kind of display ad would most appeal to her.

Say she has been reading articles on Jessica Simpson on celebrity magazine sites within the co-op and browsing the online shops of competing shoe merchants. On a subsequent visit to a site in the ad network, Permuto serves her a Heels.com ad for Jessica Simpson shoes that it creates on the fly using information from the merchant’s product feed.

“Permuto profiles our shoppers and other Internet users and shows them highly creative ads they piece together that show people precisely what they are interested in,” McCoy says. He points to another company, Alvenda, that lets consumers make a purchase from within a banner ad. “These are examples of the future of online display,” McCoy says. “I hate to even say the word ‘display’ because technologies coming out today are nothing like traditional online display ads, that’s how much better they are.”

In with the new
The offerings from Permuto and Alvenda are just the start of what’s new in online display ads. There are ads that incorporate video. There are display pieces that include up-to-date, on-message tweets from Twitter. There are services that prevent placement of ads on undesirable sites, preventing wasted spend.

All of these have the potential to increase the efficiency of web display ads, and retailer spending on a format that many have viewed as an afterthought.

In a survey last year by Forrester Research Inc., only 9% of retailers rated banner ads as an effective online marketing tactic versus 83% for search engine marketing. And their spending reflected those preferences: while big retailers in the survey spent 5.8% of their marketing budget on display ads, they devoted 41.2% to paid search.

But the new techniques and technologies available today are making more ads catch more people’s eyes, experimenting retailers and ad agencies say, and they’re making online display, finally, a more profitable venture.

Custom social ads
When SocialMedia.com approached 1-800-Flowers.com Inc. and told the retailer of its new display ad technology, the retailer jumped at the chance to test it. SocialMedia.com aggregates geographic data from users’ Internet Protocol (IP) addresses and messages from social networks including Twitter and Facebook to customize ads it displays to Internet users.

“You need to get folks engaged,” says Kevin Ranford, director of web marketing at 1-800-Flowers.com. “We have had some significant wins with our social media programs, and social media just screams engaged. So how do you get that type and level of interaction in our various ad buys? When SocialMedia.com approached us, we thought it was a great way to achieve this.”

SocialMedia.com serves these custom social ads in two ways, both using overlays that appear when an Internet user mouses over the display ad.

In the first instance, the goal is to foster a sense of community and encourage people to buy. By collecting data on the number of times on which an ad is clicked and on where the viewers are from based on their IP addresses, SocialMedia.com is able to create messages for 1-800-Flowers.com such as, “Over 157 people in Chicago thought that someone in their life deserves flowers.” Below that is a button that reads Send Flowers to Someone Special, which leads to 1-800-Flowers.com.

In the second instance, the goal is to get ad viewers in the spirit of buying a gift through comments from fellow flower fans on Twitter. SocialMedia.com searches for keywords established by the merchant, in this case “flowers,” filters comments for relevance and to screen out inappropriate language, then manually reviews the comments to find ideal matches.

Below the Send Flowers button on the overlay with the geographic pitch is another button that reads “See what others are saying...” Clicking on this transforms the display ad into a mini-Twitter feed, with the images of the tweeters and their comments, such as, “I’m looking at the most stunning bouquet of flowers ... from a certain someone on the East Coast.”

“We’re running a test now in advance of Mother’s Day,” Ranford says. “We’re fighting users’ tendencies to just glaze over everything on the right rail by tying into display ads engagement with community. We’ve seen such success in social media that this seems like an obvious strategy to port over.”

Early results of the test are in, and Ranford says there has been “a strong uptick in click-through rates” in A/B testing of ads with social media versus ads without it.

The right place
To get strong click-through rates, an ad needs to be in the right place. If it’s in the wrong place, it not only can be a waste of money but a vehicle for trouble.

That’s the premise on which AdSafe Media is building its business. Launched last year, it has partnered with 25 ad networks and site publishers and at any given time, it says, is a part of 30 to 50 online display ad campaigns for retailers and other advertisers. The goal is to ensure that display ads only appear adjacent to appropriate online content.

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