Reports yesterday that Web ad sales have overtaken TV ad sales to become the largest advertising medium in the UK underscore the possibility that the Web holds the key to the future of marketing. But findings by a joint comScore/Starcom study paint a less rosy picture for Web advertising’s effectiveness, at least in terms of the standard banner ad. In less than two years, the number of people who click on display ads has declined by 50%. Moreover, just a few people compose the vast majority of those clicks, as 8% of Internet users account for 85% of all click-throughs. That raises two important questions: Is the banner ad really effective, and is the click-through rate, the standard by which banner ads’ values are determined, even relevant anymore?

Of all Internet users, only 16% actually click on display ads, down from 32% in July 2007. The concentration of those clicks has halved as well, with the 8% that are responsible for most clicks down from 16% that were responsible for 80% of clicks two years ago. Those doing the clicking aren’t necessarily the most desirable demographic for many advertisers either; most are lower-income young adults, so click-through numbers do not take into account the media and buying habits of the vast majority of Internet users.

So is the click-through rate a relevant metric by which to value Web content and the effectiveness of Internet ads? Display ads certainly aren’t worthless. Previous comScore studies have found that consumers exposed to display ads are 65% more likely to visit a brand’s site than those who aren’t exposed to the ad (which makes sense--you don't visit a Web site you know about). Display ads also up the number of searches for a particular brand’s name among those people exposed to the ad. Exposed to both display and search ads, comScore found that users are nearly twice as likely to make a purchase from the site advertised.

But, as a measurement for an ad’s monetary value, it’s time to retire the click-through. The connection between the number of times an ad is clicked and the amount of business it generates for a brand is a dubious one at best. The amount of time users engage with an interactive ad and time spent on a brand’s Web site after clicking through are far more important than the click itself. The metric also can't measure the value derived from users who are exposed to the brand message but do not click through the ad. The click-through rate is a tempting stat because it’s so easy to measure, but it’s time to find a better standard for valuing ads on the Web.

[Advertising Age]