Online Advertisers Spent 23% More in First Half 2011, But They Continue to Want Ads Targeted to Lower-Income Click-Happy Types

According to the latest from the IAB and PricewaterhouseCoopers,

Display-related advertising — which includes banner ads, rich media, digital video and sponsorships — totaled more than $5.5 billion in the first six months of 2011. Display increased 27.1 percent over the same period in 2010, substantially exceeding the previous year’s growth rate of 16 percent. Digital video once again commanded double-digit growth — up 42.1 percent over a year ago, and moved close to the $1 billion mark with $891 million in half year 2011 revenue.

Good news, right? The numbers do paint a rosy picture for “display advertising,” which is often considered the “brand advertising” side of digital. Just because the ad unit is graphical, though, doesn’t mean its intent is brand building. (More of my thoughts on the difference between “graphical ads” and “display advertising” here). When you break down the IAB / PwC data based on the contract structure — whether the advertiser is buying impressions (on a CPM basis) in order to affect brand metrics, or it’s buying clicks (on a CPC basis) to drive transactional or direct-response metrics — you get a different picture. David Kaplan at PaidContent explains it this way:

The latest figures for online ad spending looked pretty good for the first half of the year, but as the Interactive Advertising Bureau’s report shows, even though display is rising, the “premium” impression-based ads still have a long way to go to catch up to performance-based ads, which tend to be of the cheaper, “click here” variety.

This is troubling, and not just for publishers who prefer to get paid for every impression they give away to an advertiser. It’s also bad news for the advertisers. If, through the structure of the contracts they sign, they motivate publishers and ad networks to push ads to people more likely to click on them, they are incentivizing their partners to deliver their ads to end users who are less likely to have disposable income to buy their wares. Those click-happy types (Natural Born Clickers, as they are called in a series of Comscore / Starcom studies) — the 8% of internet users that are responsible for 85% of the clicks on display ads — aren’t the audience that most brands want to reach. They are more likely than the average internet user to make less than $40,000 and to visit gambling and get-a-job sites.

A bad, self-reinforcing cycle appears to be underway. Advertisers demand that publishers and ad nets sell them inventory on a per-click basis — because advertising on the internet doesn’t impact brand metrics among the upscale audience they’re targeting. Meanwhile, to make the economics of those CPC contracts work out, publishers and ad nets are forced to target the lower-income (perhaps unemployed) audience that is more likely to click on banners.

  1. # Pete Spande said: September 30th, 2011 at 6:35 am

    Great point. Remember, almost all Facebook ads are considered display. As they grow their biz the display pool begins to look more and more performance based. The IAB said as much later on in the report. They say that Cpc/CPA pricing is growing on a percentage basis while cpm pricing declines.

  2. # Chas said: October 1st, 2011 at 9:17 am

    Pete–How are you guys addressing this, are you selling more stuff on a CPC basis? Or finding new ways to prove that branding is working on the CPM programs?

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