Joe Nguyen | November 18, 2010
The Internet was coined ‘the most measurable medium’, largely as a result of the industry’s reliance on click-through rates (CTRs) to measure online advertising. But over the past several years, and through a variety of industry research, we’ve learned while clicks can be measured, they do not necessarily matter, at least not to the extent that many might have believed.
There are several reasons why CTRs are not the appropriate measure of display advertising’s effectiveness. Perhaps most notably is the fact that the majority of Internet users do not click on display ads, and the percentage of users who do is continuing to decrease over time.
In March 2009, only 16 percent of U.S. Internet users clicked on an ad, according to our research with Starcom USA. That’s a 50 percent decrease compared to July 2007.
And the same trend in rates has been seen across global regions, according to the DoubleClick annual benchmark report .
If a campaign’s effectiveness is only measured on clicks then the campaign is therefore ignoring 84 percent of Internet users – a major missed opportunity for the majority of brands.
How do online direct response ad dollars measure up to other mediums?
Using click-throughs to measure effectiveness is essentially making the Internet a direct response medium. A look at how the online channel is utilised for advertising versus other media such as TV, print, and radio revealed vast differences in the brand versus direct response dollar split. Of the $186 billion spent on media vehicles outside of the Internet, 63 percent is spent on brand marketing; while 37 percent of the total dollars is spent on direct response marketing, according to Lehman Brothers/ThinkEquity Partners. In comparison, of the $26 billion spent on online media, only 23 percent of dollars is spent on brand marketing; while 77 percent is spent on direct response marketing.
But what will it take to move the industry beyond viewing the online channel as a direct response medium where the click is king?
The industry has been slow to move beyond the idea of the online channel as a direct response vehicle measured by click-throughs to utilising it as a branding vehicle, where the true potential of the digital economy can become a reality. There is clear and mounting evidence in support of the Internet’s ability to build brands and the industry is beginning to recognise and act on the potential. As addressed in our company report, ‘How Online Advertising Works: Whither the Click?’ (registration required) even with dismal CTRs, display advertising has been shown to lift site visitation for the advertised brand, to lift trademark search queries and to build both online and offline sales.
As an increasing percentage of brands’ budgets move to digital, marketers must be able to effectively measure the total impact of their digital advertising campaigns, which includes many other more meaningful measures other than the click, and to develop strategies and execute campaigns that will result in the greatest return-on-digital investment.
The digital environment is increasingly complex, but with this complexity comes an immense amount of opportunity for innovative and forward-thinking brands to seize the potential that comes from this engaging and far reaching platform. Before planning and measuring your next campaign, here are a few things to keep in mind:
Digital Advertising: What to Remember and Forget About the Click
- Clicks on display ads are a misleading metric, and one should only use clicks for direct response ad campaigns (or search).
- Clicks do not reveal information on brand building. Clicks don’t measure all of a campaign’s sales impact nor the cumulative (latent) impact of ads.
- Click-through rates continue to decrease as more content is created and more advertising inventory is available.
- The majority of clicks come from a small percentage of the total population. One of our company studies found that heavy and moderate clickers only represent a combined 8 percent of the U.S. Internet population, yet they account for about 85 percent of all click-throughs.
- Clicks are not the right metric to use for measuring online branding. Better metrics such as ‘reach and frequency’ help establish online media on the same playing field as traditional media to provide continuity in planning.
- Although it might be coined ‘the most measurable medium’, brands need to understand what metrics (and there are many!) are important in measuring their digital success.