• by Laurie Sullivan  @lauriesullivan, April 13, 2009

Ad metrics are changing. Conversions and order size will replace clicks and visits as the de facto standard to measure performance, as data collection features in banner ads give advertisers a better way to track deals, according to Cheryl Kellond, SVP of advertising at ChoiceStream.

The industry has been slowly moving in this direction, but some believe the shift has been accelerated by difficult economic times. Kellond says technology companies need to educate traditional marketers and their brands about the shift. "It's not the way traditional media has been measured, but in time this will become known as the traditional model," she said.

The way that ads drive performance has changed, Kellond said. In the past, advertisers have used information on browsing patterns, age, gender and geographic location. That's important information, but not the "holy grail of information" similar to shopping data. Advertisers have mastered finding audiences, but now they can personalize ads on the fly.

ChoiceStream's RealRelevance Ad platform released in January allows retailers to personalize ads by inserting targeted offers and recommendations to specific consumers. The ads rely on Web-page tags containing consumer shopping data such as commerce-related searches, purchases and clicks-throughs. The data helps to serve up targeted ads that can drive sales and return on investments (ROIs).

From one ad tag, Cambridge, Mass.-based ChoiceStream can generate millions of permutations of the ad, each personalized for a specific customer. This technology, and others like it, will force the industry to change the metrics to quantify success. Consumers who see something that interests them in the ad are more likely to click through. "We've seen click-through rates climb 200%, 500% and 700% because people see relevant ads," Kellond said. "It's not just about seeing the ad. It's about consummating the purchase after the click."

The ads click through to landing pages. From that landing page, click-to-buy conversions have increased by between 100% and 150%. The average order size has also increased by 25%, she said.

Click-through rates for online retailer Overstock rose 200% after setting up an ad campaign based on ChoiceStream's RealRelevance platform earlier this year. The company experienced an increase in conversion per 1,000 impressions, and more than five times increase in revenue per 1,000 impressions. The company plans to spend about $15 million, or 20% of its overall marketing budget, for this year on these new personalized ads, according to ChoiceStream.

"Marketers now realize there are many touchpoints that matter before a consumer makes a purchase," said Emily Riley, senior analyst at Forrester Research. "The economy has forced marketers to think more strategically about correctly measuring ads. It's a long ongoing trend that slowly builds, rather than one day everyone wakes up and does things differently."