Advertising does not lead to immediate response
In no medium does advertising lead to an immediate behavioral response. Consumers do not run out of their houses every time they see an ad for a new product or service. Rather, advertising works slowly by increasing awareness and the comfort levels of individuals. The message has to seep into the consciousness of the person before there can be interest in the message. Only after this will a person go out and try something new.

What this means is that the click-through rate, by itself, is essentially meaningless. If consumers do not click on an ad, that does not make it ineffective. Consumers who are influenced by the ad may return after a while even though they may not have clicked on it. Similarly, if a consumer clicks on an ad, it does not automatically make it effective. Frequently, we see that there is no clear post-click call for action. A consumer may click on a banner and be taken to a site with 10,000 sub-pages. The consumer may be befuddled by this, back off, and never return. But the advertiser counts this as a click-through and is delighted at the result. This is a particular problem with ads designed to resemble a site’s content (e.g., with buttons that say “OK!” or “Click here!”).

I can almost see a sophisticated reader immediately say- “Of course, it is not about click-throughs. Rather, it is about conversion rates- i.e., what happens after the click-through.”

I will submit to you that this approach is also inadequate because it expects an immediate behavioral response. What is needed is a comprehensive measurement system that looks not just at changes in behavior, but also in consumer attitudes towards the ad and the brand. There can be an immediate change in attitude, but rarely is there an immediate change in behavior.

Targeting trumps annoyance
Currently, there is a movement to increase the annoyance factor of ads. It has become common to have multiple pop-up ads. As a user closes one screen, another pops up. At the end of the session, the user may have closed 4 or even 5 screens. The superstitial ad is similarly very intrusive. Individuals are assaulted with a TV-style ad and may not even have the option of closing it in some cases.

The argument behind these ads is that consumers will not pay attention to ads unless they receive a slap in the face. I have met some online advertising companies who boast of the increased click through rates when they use these techniques. What they do not know anything about is the number of people who were completely turned off by the ad. Some consumers are now swearing off leading advertisers who use pop-ups or pop-unders (X10, Orbitz and Verisign in the US) and the backlash is only likely to increase.

In direct contrast, look at the ad strategy of Google, the world’s leading search engine. The company uses a very targeted approach to advertising. Companies can only buy text ads that will appear when users search for a certain keyword. The ads are clearly marked and appear either at the top of the search listings or on the side. There is no banner ad on the home page of Google!

Is it any wonder that this high level of targeting brings in more revenue? As shown in Figure 2, the top two categories of ad revenue are search engines and classifieds. Both categories offer a high level of targeting and a low level of intrusion!
What consumers need online is not a slap in their face, but an ad that targets their needs, their personality and their lifestyle.

Advertise to a few
Publishers who took a free approach to content and service pricing, counted on building up huge customer databases and traffic numbers. While this is a legitimate advertising practice, niching as an advertising strategy has been seriously underused on the Web. This is especially surprising because the Web is very conducive for advertising to niche groups. There are many web sites that will never have the audience numbers of Yahoo. But, these sites provide advertisers the chance to appear before a group that is tightly defined and is homogenous in many respects.

At this point, many publishers are moving from free to fee. This does not necessarily mean the demise of advertising as a revenue stream. You can still advertise to paying subscribers. In many cases, subscribers who pay are those with a greater interest in what you have to say and have a greater commitment to your brand. As a result, they will not mind seeing advertising. However, the quantity of advertising may have to be reduced, which takes us nicely to my next point.

Decrease supply of banner ads
There are too many ads on the Web. In a push to earn more ad revenue, publishers have increased the number of ads on their pages. But, as the number of ads on a page increase, the effectiveness of all ads decreases. This is because this increases the number of objects competing for the consumer’s attention. Instead, if a publisher reduces the number of ads, the effectiveness may actually increase.
When an online publisher has too much ad inventory, the industry practice is to use it for home ads. At one point, there were reports that a few leading sites were allocating about 1/3 of their ad inventory to home ads. This is not a good use of that space and it makes the publisher look bad in front of consumers.

E-mail ads work
It is a big mistake to equate advertising on the Internet to banner ads. E-mail ads can be very effective since they are direct. They can be used effectively to build deep relationships with existing customers and to recruit new customers. They are great vehicles to alert consumers about dropping prices. Using the principles of permission marketing, e-mail can become an interactive communication and relationship-building tool with consumers.

E-mail ads can also be viral if used appropriately. Creating an innovative message that consumers would love to pass on to their friends is an underrated tactic.
When Mobile Commerce takes off, text messaging (or SMS) will be a similar ad medium. These messages are direct, quick and short. They are essentially e-mail messages for those on the go.

Final word
Wherever there are people, there will be ads. The trick is to design ads that communicate the desired message to the right people at the right time. Ads can add to the consumer experience and they do not have to be intrusive. Ads can work- if they are designed well, i.e., keeping the consumer in mind.