Banner Ads Work!

Yes, Banner Ads Work.

Banner ads are one of the most controversial and interesting aspects of digital marketing. On one hand, they are literally everywhere. On the other hand, there is an increasingly vocal group of marketing experts who claim that banner ads do not work.

These detractors have marshaled an array of arguments and statistics, which they believe shows that banner ads should go they way of the horse and buggy. I will not go into the specific data since it is readily available, but their argument, I think, boils down to three key points. People ignore banner ads, banner ads are annoying, and the data shows that very few people actually click on them.

We should be fair here, and admit that there are issues with banner ad that fuel the debate over their efficacy. These issues, however, have more to do with the technological execution of the concept than the concept itself.

One issue that we here at Gotcha have been working on is the precision with which consumers can be targeted with online ads. A common complaint about banner ads is that they push products that the person viewing them has no interest in.

This is an issue with the predictive algorithms, however, and not the concept of ads on websites. The work that needs to be done is on the technology that predicts what a person who just bought Doc Martins might also want to buy; like a belt that matches the color of the shoe.

Farhad Manjoo wrote a fantastic article for a few weeks back, discussing the effectiveness of banner ads on Facebook. The resistant to these ads, as the article describes, has been even more volatile to the pushback against banner ads in general.

Manjoo’s argument is simple. Yes, people distrust, dislike, and ignore banner ads on Facebook (and elsewhere, I would argue), but it doesn’t matter, because these ads are still getting these viewers to purchase the advertised products.

The article explains a series of recent studies conducted by Facebook and Datalogix, a company that tracks “the purchasing patterns of more than 100 million American households” through loyalty programs. The two companies discovered how to integrate their respective datasets, so that Facebook could tie its users profiles to what they purchase at supermarkets, pharmacies, etc.

Let’s jump into the data that Manjoo summarizes:

“Of the first 60 campaigns we looked at, 70 percent had a 3X or better return-on-investment—that means that 70 percent of advertisers got back three times as many dollars in purchases as they spent on ads,” says Sean Bruich, Facebook’s head of measurement platforms and standards. What’s more, half of the campaigns showed a 5X return—advertisers got back five times what they spent on Facebook ads.

The more devastating set of statistics (for banner ad detractors), however, showed the total lack of correlation between purchases and clicks. “On average, if you look at people who saw an ad on Facebook and later bought a product, [fewer than] 1 percent had clicked on the ad,” Bruich says. In other words, the click doesn’t matter; people who click on ads aren’t necessarily buying, and people who are buying are almost certainly not clicking (emphasis added).

I think this derails the standard case made against the form, as well as tying back into my earlier point about the real issue being a technological challenge with the degree of precision in consumer targeting.

Facebook’s banner ads clearly work. Why? Because Facebook has enough data to show people ads for things they might actually want, and push them to buy one brand over another. In other words, Facebook algorithms know us well enough to hit us with ads that, whether we know it or not, generate demand for X brand over Y brand.

The viewpoint that because click-through rates on banner ads are low, and people are vaguely annoyed by them at times, means that banners are a waste of money and don’t work, has become its own kind of orthodoxy.  And pending further evidence, it should be rejected, or at least revisited.