eROI is now Thesis      →

Death of the Display Ad

Much has been made about the news that in 2016 more money will be spent on display advertising than search. Many marketers and agencies are declaring this the heyday of display advertising. I don’t mean to rain on a perfectly good echo chamber, but these people are wrong.

In the last episode of our podcast, I made the prediction that 2016 is the year that display ads—and in particular banner ads—start to die. If you haven’t been living under a rock for the last decade, you know the ads. Either on top of the page, or down the sidebar. Usually they are simple images with CTAs, but often they are flashing gifs or movies. In extreme cases they have sound.

While the top line numbers for ad providers like Google are going to look good for the foreseeable future, the ROI for marketers and the revenue for publishers are going to start looking pretty paltry.

Let’s start by looking at the numbers:

The average click rate in the US on a display ad is 0.8%. That’s barely above a rounding error. When you factor in that according to Goldspot Media, 50% of clicks on ads are accidental, the numbers start to stack up against you quickly. By these numbers, the average banner ad only gets 4 people out of every thousand to do anything remotely valuable, and the sites still have to convert them from there.
That means that at best, 99.6% of people who see these ads come away with a neutral or negative view of the ad and the brand that places them. Many companies would be better served by putting their display budget in barrel and lighting it all on fire.
Ad blocking grew by 41% in the last year, and 10% of people added an ad blocker in the last quarter of 2016. You read that right. Not a 10% increase, but 10% of people, up to 38%. So now 4 out of ten people don’t even see banner ads at all.
30% of ad block users surveyed by Adobe in 2014 started ad blocking to remove a specific type of ad they found intolerable. While 45% didn’t want to see any ads.
Things are starting to look pretty grim for the advertisers investing and relying heavily on traditional banner ads to drive ROI. With Samsung and Apple both supporting ad blocking software now, it’s only going to get worse.

What got us here?

The road to banner ad death has been long, but not unforeseen. 54% of people don’t click banner ads because they don’t trust them, and many, many more find them intrusive and annoying. Even worse, many people suffer from “banner blindness” where they just tune out all of the ads, and never look at them. The best targeted and designed ad will never reach these people.
At the heart of it, distributed ad networks have created a race to the bottom, where the only currency is clicks. With every ad competing for these very few clicks, we end up with ads that are too flashy, autoplay sounds or video and generally disrupt the site experience. Worst of all, most of the ads you see just aren’t relevant to you. That leaves little room for the minority of well-targeted, thoughtful and trustworthy ads.
Even retargeting, which effectively converts customers who have abandoned their browse or their cart, can become a creepy game of hide and seek when done incorrectly.
Publishers deserve a little bit of the blame here as well. With every ad impression driving revenue, the temptation to keep adding ad units is immense, especially as publishing revenue has dropped. All this does is further muddy the page experience. Worse are the sites that now require you to have your ad blockers turned off to read their content. If there’s a faster way to alienate your core readers, I’m not sure what it would be.

Is there a light at the end of the tunnel?

While the desktop ad experience is probably broken beyond repair at this point, the fastest growing display ad types are in mobile and video ads.
Mobile ads are going to account for over half of all display ad spending in 2016, and some studies have shown that they are converting almost 50% better than desktop ads. How advertisers adapt to the different dynamics of mobile browsing will define the fate of display advertising going forward.
As more TV budgets are moved to online programming, pre-roll video ads are also an important piece of the display puzzle for 2016 and beyond. Creating compelling and relevant video ads can shift the tone of display ads to something more palatable to consumers.
Now more than ever, a smart display ad campaign needs to embrace the new frontiers of banner ads, and avoid the pitfalls of the past. Embracing mobile, video and smart retargeting is the only viable way to maximize the ROI of your display dollars.