Click-thru rates may not be good yardstick for banner ad effectiveness
NEW YORK. 04:45PM EST—Click-through rates for banner advertisements on the Internet continue to decline, but analysts say advertisers shouldn't lose any sleep over the trend.
"We've seen this trend go on for awhile, but it's not something advertisers should be terribly worried about," says Meadows. "Click-throughs are a convenient metric to track, but it's not the best one."
Meadows says there are several reasons why web surfers are less likely to click on banner ads. One is that the novelty of banner ads is wearing off as people get more used to surfing the web. Another is that, with the growth of online advertising, there are more banners competing for web surfers' attention.
Furthermore, Meadows says the increasing use of third-party advertising networks that serve ads to web sites may also have slowed down the loading of banner ads. If banners load more slowly than the web site's content, the audience is less likely to click through the ad. Among some of the companies that aggregate advertisements and serve them to various content providers are Doubleclick (nasdaq: DCLK), Adforce (nasdaq: ADFC) and Flycast (nasdaq: FCST).
Still, the decline in click-throughs doesn't necessarily mean the ads are any less effective, Meadows says. "It depends on your objectives as an advertiser. If you want to sell your products, click-throughs may be somewhat relevant. But if you want to increase brand awareness, it's less significant."
He also says that the ads that get the highest rates of click-throughs aren't necessarily the ones that generate the most sales. The conversion rate--industry jargon for the rate at which advertisers convert web surfers into shoppers--varies greatly from ad to ad.
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