Display ads make a comeback, building on advances in targeting and ad formats that do more than scream "click here."
Allison Enright , Editor
If today's online marketers climb into a time machine and revisit the digital budgets of yesteryear—read: the late 1990s—they'd uncover an era when their predecessors spent nearly all—about 89%—of their digital budgets on display ads and paid for 40% of those ads based solely on the number of times host web sites served ads to web site visitors, visitors the web site operators and advertisers knew very little about.
Spending nearly all of a digital budget on an ad format that provided little in measureable returns may be unfathomable to today's metric-driven marketers. But in 1998, spending on paid search engine marketing was so small it was lumped into the "other" category by the Interactive Advertising Bureau trade group's annual Internet advertising revenue report. The Internet offered little beyond display for marketers to spend money on in 1998.
Display advertising's early selling point was its ability to build awareness for the advertiser, an investment in brand building designed to pay off down the line. But in the early 2000s, search engines took off and brought a new form of marketing that allowed each advertiser to measure each click and every penny spent. Paid search ads went from accounting for virtually no spending in 1998 to 35% of online ad spend in 2003 and 46% in 2008. Search's rise came at the expense of display, which slid to 41% in 2003 and 33% in 2008, according to the IAB.
But that slide has come to a halt, as display ads accounted for 35% of digital marketing budgets in 2011, the IAB says. Two developments mainly account for the turnaround. First, there are new ways to use the vast amounts of data being collected by online marketers to better target ads to consumers likely to buy from a particular advertiser. Second, there are new display ad formats that allow advertisers to create ads that are more personalized and engaging than ever, and that even incorporate Facebook posts as they appear on the social network.
It's still early days, and there is plenty of experimenting going on, but retailers already are making use of these new online display possibilities in intriguing ways.
Targeting and prospecting
FreshPair.com illustrates the evolution underway. The web-only underwear e-retailer added online display ads to its arsenal only about three years ago. It started with the retargeting format that can be most easily measured and now is testing online display ads aimed at bringing in new customers.
Previously, the 12-year-old e-retailer focused its marketing investments in paid search, taking steps to move up in natural search, and e-mail because the impact of those ad forms on the bottom line was clear and measurable, says Kaitlin Moughty, senior marketing manager. She says display today is edging closer to that. "Everyone questions the capabilities of display, but with more transparency and more reporting, those black hole questions are being answered," she says.
"What's taken place in display is that it was a static inventory form that never performed well from a direct ROI standpoint," says Tony Zito, CEO of mediaForge, a marketing services vendor that FreshPair.com works with for display advertising. "The influx of data has changed that dramatically."
Most of FreshPair.com's display ads today are retargeted ads: They are shown to consumers who have visited FreshPair.com as they navigate to other web sites and are designed to bring them back to FreshPair.com. Moughty says retargeted ads are the easiest to justify because they naturally have higher engagement, click-through and conversion rates than more general display ads. That's because the consumers viewing the ads have already demonstrated an interest in the e-retailer.
Moughty says FreshPair.com is treading more cautiously at using display ads for prospecting for new customers and brand building. But the e-retailer has tested a few campaigns and plans some more, Moughty says.
To create the most recent of those, the e-retailer worked with mediaForge to target FreshPair.com ads to consumers whose online behavior and demographic information mirrored the profile of existing FreshPair.com customers. Moughty says she shared with mediaForge the e-retailer's goals for the campaign and the vendor placed the ads based on FreshPair.com consumer data, mediaForge's own data, and that of the ad networks it works with.
An e-retailer can place display ads directly with ad networks, but Moughty says she finds it more effective to work with a vendor like mediaForge that has a lot of experience with the ad networks and is better able to solve technical problems. "On a self-serve model it was hard to find a contact or get answers," she says. "The animation in our ad wouldn't get approved and we wouldn't be able to find out why. When you align with a partner, they work through those types of issues."
Moughty also says the vendor landscape has changed when it comes to display, and that's helped introduce pricing models more appealing to advertisers that don't have massive budgets. FreshPair.com pays mediaForge based on performance, which means if campaigns don't meet pre-established goals, mediaForge doesn't get paid. "A few years ago, there was the feeling you needed to spend $25,000 or $50,000 a month, and that isn't the case anymore. They really want you to be successful because that means they are successful," Moughty says.
Display ads today also come in a greater number of sizes and can include more content designed to catch consumers' eyes. Some web sites that show ads also are getting better at placing ads alongside content related to the ad, improving the likelihood of the ad being seen by consumers interested in what the advertiser is selling. That's what AOL Advertising is doing with a display ad unit it calls Project Devil. AOL Advertising is a unit of AOL Inc., and sells ads on all AOL sites, which includes highly trafficked sites like The Huffington Post.
Shoe e-retailer Zappos.com, a unit of Amazon.com Inc., began using the Devil unit last year on sites like Popeater.com (recently renamed Huffington Post Celebrity), to connect consumers to real-time information and visually engaging images and video from Zappos, says Laurel Boyd, associate media director at Mullen, Zappos' ad agency. One Zappos ad included video, live posts from Facebook and big imagery with a rotating photo gallery, she says, and was the only ad shown next to articles about fashion and style—the kind of content a Zappos customer would likely be interested in viewing.
The live nature of the ad, and the fact that it's the only ad on the page, helps engage viewers, says Greg Rogers, co-founder and CEO of Pictela, the AOL Advertising unit that manages Project Devil. "Uncluttering the environment lets viewers focus on the content," he says. "We're trying to steer toward a notion where if you are going to have an ad next to great content, that ad should be great content too."
AOL Advertising says the Project Devil ad unit, which measures 300x1050 pixels, about the same width as commonly seen display ad units but much longer vertically, has an engagement rate 550% greater than smaller, more typical 300x250 pixel units. The company says the Project Devil unit also increases purchase intent an average of 263% compared with the smaller unit. Other retailers that have used the ad unit include Nordstrom, Target, Macy's and Kohl's. A consumer viewing the Nordstrom unit, for example, could rotate through pictures of current sale styles, view a short video, enter her ZIP code to locate a store and see a map showing the nearest store without ever clicking off the web page she was visiting.
"The advent of ad units like this means ads are going to do a better job drawing users in," Boyd says. "Interest in this is definitely growing from advertisers, and budgets are growing for this type of branding," Boyd says. Rogers declined to say what a Project Devil ad unit might cost on a major site, but acknowledged it is more expensive because it is the only ad inventory available on that page. Microsoft Advertising also offers an interactive ad unit, dubbed Filmstrip, which can feature content from multiple sources.
More advertisers might try these types of ads, since the IAB approved both Project Devil and Filmstrip formats as "standard" ad formats last year. Most marketers and agencies use IAB-approved standard ad formats as a framework for ad inventory and web page design.
Another way marketers are making display ads more relevant is by inserting content into ads based on what they know about the individual consumer viewing them.
Online ticket marketplace StubHub, a unit of eBay Inc., in January began using data culled from its customer relationship management (CRM) database to create targeted display ads. Unlike display ads used for prospecting new customers or retargeted ads served based on web site visits by anonymous consumers, StubHub's display ads are created based on data from existing customers, which means StubHub knows exactly who it's showing the ad to. It also means StubHub can personalize the display ad the consumer sees based on all the data he's given the ticket reseller in the past, such as which events he's expressed interest in, how soon before an event he makes a purchase and what price range he typically buys at.
The technology that makes it possible for StubHub to systematically link that kind of data about individual customers to the display ads comes from Responsys Inc., a digital marketing services provider, which StubHub had previously used to manage its e-mail efforts.
"We're trying to leverage the best practices we know work for e-mail marketing and direct marketing over to display," says Dan Morrill, e-mail marketing manager at StubHub. "Often so much of what you spend on display is on an unknown audience where it's just hoping to catch a fan. With this display [targeting process] we know who they are and we know they are a user of StubHub."
StubHub is testing different ways to apply customer data to display, and Morrill says early results are encouraging. One form it is testing is to reinforce e-mail messages a consumer has responded to in some way. For example, if a consumer opens an e-mail message with a subject line about baseball, that same customer may see a display ad online during the following week about local baseball ticket availability on StubHub.
StubHub also is creating display ads based on consumers' previous behaviors apart from e-mail. For example, if a consumer in Los Angeles bought tickets on StubHub to a Michael Bublé concert a year ago and StubHub has a lot of Bublé tickets to sell for his next concert in L.A., that consumer may see a display ad noting that availability. "We're focusing on how we can use our deep customer data to serve relevant messages on display," Morrill says.
That kind of application of consumer data, combined with more attractive and engaging ads, are helping breathe new life into what was a staid online ad format. Marketers are now carefully using display to draw consumers closer to the Buy button, and more innovation surely lies ahead.