Attracting shoppers

10/01/2008

Online display ads can pull potential customers to an e-retailer’s site—especially when the ads are targeted

When it comes to online display ads, CyberDefender Corp. aims to be a chameleon. The e-retailer of anti-virus, anti-spyware and other software doesn’t want to be flashy, or Flashy. It wants to blend into web pages—not just visually, but contextually. Its goal is to make its ads look like they belong.

One text-oriented display ad for anti-spyware software shows the CyberDefender name and logo and focuses on bulleted messages and calls to action. These include: Protect your identity. Free spyware scan. Remove viruses, adware and more. Download now.

The goal is to make the ad appear to be just another part of the page, another piece of content, not something that intrudes on the user experience, says Janielle Denier, e-marketing analyst at interactive marketing firm WebMetro, which CyberDefender uses to help formulate strategy and place its display ads.

To further ensure its ads blend in, CyberDefender uses contextual targeting technology through ad network Google Content Network. The e-retailer and its marketing firm set up “ad groups,” a collection of one to 50 keywords, for each display ad it runs.

Google spiders search the Internet for web pages that contain the keywords. When a user goes to a web site within the Google Content Network, Google places the appropriate ad on the page with the keywords.

The results are in

The e-retailer pays for display ads by the click. Since it launched the anti-spyware ad in mid-May, the ad has received a 1% click-through rate and 1% conversion rate. In June, this particular ad group—the e-retailer runs hundreds—produced 7,950 sales of the anti-spyware software. “Using the ad network to run all our ad groups and different display ads has proven to be very powerful,” says David Bruggeman, vice president of marketing at CyberDefender.

Many retailers place online display advertising low on the list of marketing priorities—if they do any online display advertising at all. As successful as it has been, online display only accounts for 8% of CyberDefender’s total marketing spend—though it’s rising. Instead, most retailers focus on paid search, e-mail marketing and affiliate marketing, and sometimes television and other media advertising.

But the landscape is changing. Internet users are spending more time online, and thus seeing more display ads. In May the average American used the Internet 26 hours and 26 minutes, up 9% from May 2007, according to research from The Nielsen Co. And companies are expected to grow their online display spends. JupiterResearch says online display spending hit $7.4 billion last year and will increase at a compound annual growth rate of 14% to $16.4 billion in 2013.

What’s more, consolidation of the online display advertising industry is creating monolithic ad networks with great reach and targeting technology that outshines the conventional method of buying placement across an ad network’s sites with little or no targeting by demographic, context or behavior. AOL, Google, Microsoft and Yahoo all have purchased numerous companies—ad networks, ad servers, targeting technology providers and others—to create one-stop shops for companies looking to use online display more effectively.

Advertisers pay for display ads in various ways: by thousand impressions, by click or by acquisition (also referred to as cost per sale). Broad buys cost less than targeted buys because they give ad networks the flexibility to place ads in a wider array of slots in their inventory.

The average price for an online display ad fell 1% from $0.37 per thousand impressions in May to $0.36 in June, according to research from online display ad automation and optimization services provider PubMatic. That’s for ads sold by ad networks, and not individual web sites.

“While ad dollars are moving from traditional sources, such as TV, print and radio, to online as consumers shift more of their time to the web, we do see a moderation in ad pricing as the economy slows; and the summer season also has an effect,” says Rajeev Goel, co-founder and president of PubMatic. “As we move into the holiday season, ad pricing likely will go up, though it’s anybody’s guess as to what will happen in the broader economy and to what extent that will affect online advertising prices.”

Retailers and other companies can approach individual sites, request media kits, and place advertisements on just those sites. But it is more common, experts say, for companies to use the dozens of ad networks, some large with huge reach and others small with focused themes, to place online display ads.

Ad networks establish relationships with hundreds of thousands of sites, ranging from enormous media sites to social networks to comparison shopping engines to small blogs. They do the research and line up the inventory.

Tracking behavior

They also anonymously cookie Internet users visiting sites within the network to track their activity and behavior, noting for instance which sites they visit and when a consumer puts an item into a shopping cart and then abandons the transaction.

Some ad networks are closed, meaning advertisers can only get a list of sites used within the network and very basic reports on how an ad is performing in impressions and clicks. Other networks are open, meaning they show advertisers the sites and even web pages where their ads appear and supply advertisers with detailed reports on what kinds of Internet users are seeing their ads. Ad networks that offer geographic, demographic, contextual, behavioral and other kinds of targeting methods typically are open.

“There are hundreds of thousands of web sites we want to be on. Do you know how long it would take us to call each site publisher and learn about their audience and specs?” says Michael Behrens, vice president of e-marketing at WebMetro. “The ad networks’ ability to spider across millions of pages and find the content that is relevant to my clients’ businesses is invaluable.”

Ad networks typically have aggregated countless sites, gathered specs on ad sizes and available slots, and in the past often dropped ads in anywhere, oftentimes on sites with little relevance to the advertiser. This is a large reason retailers and other companies have been turned off by online display ads.

What’s driving increased interest in ad networks now is their burgeoning ability to target ads. Targeting enables relevancy. Advertisers can specify geography, demographics, page content and behavior (shopping cart abandonment, for example) to ensure their ads are being viewed by Internet users most likely to be interested in their wares.

“I liken targeting to search six years ago—most advertisers were still going broad, not granular,” says Scott Howe, vice president and general manager at DRIVEpm, the ad network within Microsoft Corp.’s advertiser and publisher solutions group.

Granular buys

This same progression is happening in online display advertising—advertisers are taking a greater interest because now they can make their ad buys much more granular, Howe says.

“Retailers are hearing about targeting and trying something simple. They message to people who’ve shopped their sites but didn’t buy anything,” he says. “Then they’re doing messaging to people shopping specific product categories they carry.”

Ad agencies working with DRIVEpm have reported about 10% of their clients want ad targeting, Howe adds, but the agencies predict within five years virtually all online display ads will be targeted.

Online jewelry auction site Bidz.com decided to try targeting for its Red Velvet online display ad campaign it ran November through January. The e-retailer, which spends 6% of its marketing budget on online display, tasked ad network Casale Media Inc. to target by geography, demographics, page content and behavior.

In behavioral targeting, for example, when an Internet user went to Bidz.com but did not register to become a bidder, Casale displayed different Red Velvet ads to that user as she visited sites in the ad network during the next 30 days. The network is able to follow Internet users through cookies—which keep information anonymous—it places on users’ computers as they visit its partner sites.

“We were trying to reinforce our message. If shoppers were interested enough to browse their way to our site, we felt that a reinforcement message would be enough to convert them to customers,” says Leon Kuperman, chief technology officer and vice president of business development at Bidz.com. “The campaign did well, achieving a return on ad spend of 500% within 30 days.”

Keeping it simple

Like CyberDefender, Bidz.com chose not to incorporate Flash animation, video or other rich media presentations in its display ads. Some experts believe this is a good tactic, saying many consumers are growing weary of disruptive or invasive ads. E-retailers should be cautious about making their ads distracting, says John McAteer, retail industry director at Google Inc.

“Smart publisher sites are starting to move away from disruptive and intrusive advertising such as pop-ups, fly-overs and other ads that are really annoying to consumers,” McAteer says. “They’re opting instead to focus on ads that give the consumer more control. For example, video within an ad that the customer can choose to start or not.”

This is the line of thinking behind online display ad campaigns run by web-only retailer Zappos.com Inc.

“We do little or no intrusive Flash banners because they do not contribute to the customer experience,” says Brian Kalma, director of creative services and brand marketing at Zappos.com. “Display ads are about ensuring we’re there, in front of the consumer, communicating our message simply.”

In its most recent ad campaign, Zappos.com did include video but ensured it was non-intrusive. Many video ads begin playing the moment they are displayed on a site. Zappos.com’s video ad featured a Play icon on the opening frame of the video that allowed Internet users to choose whether to play the video. The campaign, dubbed “Put a Little Zappos in Your Day,” ran in April and May.

The e-retailer chose to incorporate video after testing different ads on the 50 sites it chose for the campaign. The sites were selected in large part because they appealed to women, the desired demographic.

This general type of targeting was handled by its media strategy and buying agency, Gotham Direct, which purchases consumer research from firms such as The Nielsen Co. and Mediamark Research Inc. Gotham also opted to run the ads on the Yahoo Network and AOL’s Platform-A ad networks for broader reach. The tests showed that a banner ad received only a 0.3% click-through rate while 5% of visitors clicked on the video version.

While the inclusion of video within an ad might seem significantly more complex than a static or Flash animation banner ad, Zappos.com found no technical hurdles. The video resides with the rest of the creative at its ad-serving company, Microsoft’s Atlas, which can serve up video as easily as it can serve up Flash, Kalma says.

“The only real challenge with video is determining whether or not a publisher’s site accepts video ads—which the agency can do—and if so, if they have a 30-second or 15-second time limit,” he adds. “In some instances, we had to pare down our 30-second video to 15 seconds. It was a challenge because we couldn’t tell the whole story we designed. What we did was eliminate the first 15 seconds, which included interactions between customers and deliverymen, and kept the key final 15 seconds, where customers are presented with a Zappos package, open it, and all this animation of psychedelic craziness comes out. The message was all about the joy of getting a package from Zappos.”

Kalma declines to provide specific numbers but says the results of the online display ad campaign were good.

Paid search

Online display, however, has a significant rival for marketing dollars. In online advertising it’s paid search, not display, that sends the greatest number of consumers to e-commerce sites. Since the dawn of e-retailing, Internet retailers have found greater success with paid search and have spent accordingly.

Last year, for example, companies generally spent more on paid search than display—and often a good deal more, according to JupiterResearch. Apparel retailers and consumer brand manufacturers spent $335 million on search and $244 million on display; in games, toys and sporting goods, $319 million on search and $93 million on display; and in computer hardware and software, $871 million on search and $216 million on display.

“Search is more than double our display ad spend, and search spending will continue to go up,” says Kuperman of Bidz.com. “With search you’ve already gotten the customer to tell you what they’re looking for before you present the ad, and the text in the search ad can be targeted directly to what they’re seeking. However, it is much easier to show that sparkling diamond ring in a display ad than in five words in a paid search text ad.”

Unlike paid search, online display advertising ultimately is more about branding than selling, and as a result, this means return on investment typically will come in the long term, says Kalma of Zappos.com.

“We see spikes in paid search on days our display ads appear, which in turn makes our ROI for paid search better. But this is not a set-in-stone metric,” Kalma says. “The display ads put us in people’s minds. If you are going to go down the road of online display advertising, you have to take a stand that you likely will not see an immediate ROI like you can with paid search. It’s not a leap of faith, it’s one marketing strategy that benefits others.”

Paying a complement

And it’s these benefits e-retailers should contemplate when considering using online display ads as a marketing tool, experts say.

Display advertising complements paid search, says Don Kennedy, senior vice president of advertising at Platform-A, AOL’s advertising business that includes an ad network, ad-serving unit, behavioral targeting technology, search engine management unit and more.

“It’s a push versus pull mentality,” he says. “With paid search, you get clicks when someone is actively searching for something. With display you are putting ads out there for folks who may be very interested in your products but not going to the engines and looking for them at that moment.”

Bidz.com is generally satisfied with how display advertising performs, but it has shifted dollars away from display to other areas, primarily affiliate marketing, that it deems of greater importance.

“We realize display advertising is definitely not going to disappear, and that it will continue to grow in the coming years. However, we find display to be a medium best suited for branding purposes,” says Kuperman of Bidz.com. “Display can’t offer the same ROI as affiliate marketing. But display advertising is a good complement to our overall marketing efforts.”

Source: www.internetretailer.com
By Bill Siwicki
October 1, 2008