What Makes1 Online Advertising Effective?

1
Online Advertising 2
Alison Kameya
Alison Kameya and Katherine Zmija2 and Katherine Zmija

How to make online advertising more

and Large Rectangle (360x300 pixels) online
effective.
ads compared to smaller ads (468x60). This
success could be seen when Vaniqa, a product
Five studies by ARF, IAB, C|Net.com, MSN and
from Bristol-Myers, began advertising online.
DoubleClick all concluded that online advertising
Starting with 23% brand awareness, Vaniqa
builds the brand (Briggs, 2001, v.1 no 3).
increased brand awareness to 30% after
Companies will find, however, that the degree to
consumers had one exposure to a Skyscraper
which online advertising improves metrics such
ad. This was a 30% overall lift in brand
as brand awareness, purchase probability and
awareness. The Large Rectangle format had
brand perceptions will vary based on the size,
even better success for the company with an
placement and format of the ad. Below we will
overall 10-point gain or 43% lift in brand
discuss different sizes and formats of online
awareness (Briggs, 2001).
advertising and how the returns from an online
advertising budget can be improved.
Technology. New technologies also improve
the effectiveness of online advertising. Flash
Before a company can determine how to
and DHTML appear to have the most potential in
increase the ROI from online advertising, it must
enhancing online advertising effectiveness
determine the goals for its online advertising.
based on two studies that were completed.
This is necessary because online advertising
Flash technology allows an advertiser to develop
serves different purposes. Online ads can help
a small size file with rich graphics. Diameter
to increase brand awareness, brand perception
found that Flash technology increased branding
and click through rates, while they can also help
metrics by 71 percent for three ads that were
to increase conversion rates, or the number of
tested. DHTML was found by Dynamic Logic to
people that go to a Web site and actually
increase brand awareness by 19%. Audio and
purchase a product. For an online publication
video were also found to improve branding
that is concerned with ROI, an increase in click
throughs and page views may be the most
important performance metric, while a company Brand Awareness Lift Using
such as IBM may simply want to increase the Technology
number of people that believe it is a technology
leader. When an online ad increases one of
80%
these performance metrics, it is considered
effective. 60%
40%
Ad size. As you might expect, larger ads help
20%
to improve branding metrics. On average, an
improvement of 40% (for single ad exposure) 0%
can be seen in the Skyscraper (160x600 pixels) Flash DHTML Audio Video

performance by 14 percent and 9 percent

1
Copyright 2002 Michigan State University. respectively (Briggs, 2001).
2
Alison Kameya is a second-year MBA student and
Katherine Zmija is a first-year undergraduate student. Both
are studying marketing at The Eli Broad College of Companies have become aware of the more
Business. This paper was written under the supervision of effective forms of advertising and have been
Drs. Glenn S. Omura and Liz Bain of the Broad College
pleased with the results. Miller Brewing
Company has been using Macromedia Flash
technology for the past few years in promotional
efforts. According to Gina Shaffer, Miller’s
senior digital marketing manager, “One
particular campaign created with Macromedia
Flash was 110 times more effective by a click
through measurement than our banner ads and
buttons. Clearly, as we look for effective ways
to engage consumers online, we consider these
one of our top tools” (Fortune 500, 2001).
Ad positioning. Good positioning of an ad can
also increase brand effectiveness. In a
DoubleClick survey, it was found that interstitial
ads could be up to 194 percent more effective in
increasing brand effectiveness. When it comes
to an ad that pops up over a Web page,
Diameter found this placement to be slightly less
effective (52% lifting) than the same size ad
placed directly on a Web page (55% lifting,
Briggs, 2001).
Creative elements. Within the online ad,
creative elements can affect ad performance.
Dynamic Logic found that the number of
elements within a banner ad is related to overall
brand awareness. Uncluttered ads, or those
with 16 or fewer elements, are more effective
than cluttered ads. In cases where ads had 16
or fewer elements, the brand awareness had a
lift of 14%, compared to a 3% lift from cluttered
banners. Elements are defined as an individual
word, logo or graphic (Carlon & Hislop, 2001).
Dynamic Logic also completed research that
showed a consistent logo is an important part of
an online advertisement. As online creative
becomes more animated, logos are often shown
less frequently. To test how “omnipresent
logos” (campaigns where the creative
contains the brand or logo 100% of the
time) compared to “sporadic logos”
(campaigns where logos are NOT present
all of the time), Dynamic Logic evaluated
its AdIndex database. Campaigns with
omnipresent logos had a 7% lift in brand
awareness, while sporadic logos saw only
a 3% lift. The message association metric
had similar results, with omnipresent logos
seeing a 33% lift compared to a 17% lift for
ads with logos that were sporadic (Carlon &
Hislop, 2001.)
ACNielsen recently conducted research to
determine how creative elements affect ad
recall, or the ability of a consumer to remember
an ad. When branding was used consistently in
each frame of an ad, ad recall and other brand
metrics improved for almost all ads that were
tested.
Ad exposure. How many times does a person
see your ad before the message association
begins to level off? Research by Dynamic Logic
has indicated that 1 exposure leads to a 5.6% lift
in brand awareness, 2-3 exposures add a 6.4%
lift in brand awareness, while 4 or more
exposures add an approximate 10.4% lift in
brand awareness. After five exposures,
however, returns were found to have diminishing
returns (Carlon & Hislop, 2001; Morgan Stanley
Dean Witter, 2001).
Are click throughs the best way to
measure whether an ad is effective?
Click throughs do not necessarily lead to more
conversions. The Summer 2001 Online
Advertising Report found that people who
viewed an online ad and went to the site at a
later time by typing in the URL, were 60% more
likely to repeat their conversions than people
who clicked through the ad initially. Only a
quarter of the conversions attributed to ads are
from direct click throughs. The rest of the
conversions occur after the ad is viewed, but are
most likely to occur within 24 hours of the first ad
impression (Engage Study, 2001).
Message Association Lift By
Frequency of Ad Exposures
40%
20%
0%
One Three Five Seven

How can a company get the most for its
money?
The standard payment for banner ads has often
been based on CPM rates (Liz Claiborne, 2001).
But many companies would like a selection of
ways to pay for online ads. Some companies
are now paying for their advertising by
performance. One company that offers this type
of payment system is Commission Junction that
is currently working with Liz Claiborne. Using
Commission Junction, Liz Claiborne only pays
for ads when a sale is made (Liz Claiborne,
2001).
Another company, Global Network Inc., has also
introduced a new pricing model for advertisers.
CAPP (Client Alternative Pricing Plan) allows
companies to choose how they would like to pay
for advertising from CPM, click through rates,
lead generation rates, or actual sales
conversion. This helps companies to choose
from a model that will help to best meet their
objective. For example, a company that wants
to increase conversion may pay a premium,
while a company just interested in branding may
pay a flat rate (Global Network, 2001)
How did it all begin?
Internet advertising began in 1994, when the
first commercially available Web
browser, Netscape Navigator
Percentage of Internet Advertising Impressions
1.0, was released. As Web
browsers became more
enhanced over time, advertising
has changed to better utilize
these enhancements. Online
advertising began as simple
banner ads, while companies
19%
can now use banner ads as well
as destination sites, micro-sites,
pop-ups, and even
advertisements that affix
themselves over a competitor’s
ads. The Internet has essentially
become the only medium where users can view
ads, request and receive information, make an
instant purchase, and save time and money.
Advertising banners account for 54% of total
online advertising revenues and are the
predominant advertising vehicle on the Web,
with full-size banners still receiving the most
advertising impressions (Morgan Stanley Dean
Witter, 2001). Banners let viewers request free
samples, register to win contests, and order
products. They are able to build brand
awareness and are now better at generating
awareness than television or print advertising.
75% of respondents to a survey by Forrester
reported that Internet users sacrificed TV
viewing to use the Internet.
As Web browsers were enhanced and became
able to support better graphics and more Web
sites, micro-sites and destination sites began to
explode. Micro-sites contain small clusters of
brand pages, which are hosted by content sites
or networks. They enable advertisers to
communicate deeper product benefits and
collect customer information without incurring
the cost of a full-blown Web site, which can cost
millions to create and maintain. Web sites or
destination sites use information, entertainment,
and high-product values to pull users in and
keep them coming back. Basically, companies
use the Internet as a full channel for exchanging
information with customers.
Pop-ups have become another tool that works in
conjunction with banner ads. When a person
visits a Web page, an advertisement opens in
18%
Full Banner
37%
Short Banner
Half Banner
Vertical Banner
Tall Button
Medium Button
Short Button
4% 1%
Micro Button
4% 16%
1%
another browser on top of the site the user is
viewing. It has the same benefits as a banner
ad but brings more attention directly to the
advertisement.
A recent technology that was introduced is
called Gator. It has allowed companies to
advertise on rival companies’ sites by selling ads
that are designed to block banners on sites such
as Yahoo with pop-ups of the exact same
dimensions, completely obscuring the original
ad. As the customer scrolls down their screen,
the new advertisement stays affixed so the
viewer cannot tell that it is not the ad originally
placed on the site. This technology, however,
has been seen as unfair competition. For this
reason, Gator and the IAB have announced that
they will work together to develop a new version
of the software, which will “support Web
publishers efforts” (Gator and IAB, 2001).
 Glossary

Advertisement or Ad: Text, graphic, video, etc. that is typically interactive.

Ad Space: The space on a Web page reserved to display advertising

Advertiser: Any individual or entity purchasing online advertising space.

Banner: An online advertisement in the form of a graphic image that typically runs across the top or
bottom of a Web page, in the margin, or other space reserved for ads.

Button: An online advertisement in the form of a small graphic image that typically resides in the margin
of a Website; used by affiliate programs and sponsorships.

Click, Click-Thru or Click-Through: The activation of a hyperlink using a mouse or other input device;
essential to the interactivity of online advertising

Click-Thru Rate (or Ratio) (CTR): The rate of activated ads to total ads displayed.

Destination Site: A Web site for a certain product.

DHTML: Technology that allows advertisers to layer multiple images on top of one another, precisely
control the layout of a Website, and add interactivity.

Flash: Technology that allows advertisers to create small sized files with rich graphics.

Gator: Technology that allows ads to completely cover competitor’s ads.

Interstitial: Pop-up window.

Micro-site: A small cluster of brand pages.

Pop-Under: A window that launches automatically behind the current browser window.

Pop-Up: A window that launches automatically in front of the current browser window.

Sponsorship: A "long term" advertising relationship that typically involves the payment of a fixed fee to
display a banner or other graphic on a Website, or be included in an email newsletter.

Glossary of Online Advertising Terms. http://www.fastclick.com/help/glossary.html

 References
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Briggs, Rex (2001). Measuring Success, v.1, no 4. Retrieved November 30, 2001
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