Click-Through Ad Rates Level Off

The debate over whether click-through rates capture the full influence of online display advertising continues to remain top-of-mind for ad executives. Most believe this is only a partial measurement of online ad success. And although CTRs have declined steadily for the past few years, online ads continue to have an increasing influence on conversions and sales.

One reason for the debate -- declining CTRs. MediaMind (formerly Eyeblaster) released a study this week suggesting that CTRs have stopped declining, and have leveled off. There are a few explanations for this end to the decline of performance for standard banner ads, according to Ariel Geifman, principal research analyst at MediaMind.

For starters, he says, the industry has found a balance where the growth in the number of impressions does not outpace users' growth in clicks, resulting in an end to the decline of CTRs. Second, advertisers have become more sophisticated in their use of standard banners -- including the use of creative optimization, retargeting and behavioral targeting ads that increase performance.

The findings, released in a Global Benchmark Report, "Standard Banners -Non-Standard Results," suggest that global CTRs stopped declining in 2009 and 2010 and remained fixed at around 0.09%.

The study found that consumers who were exposed to relatively few ads are more likely to have a high CTR compared to those who are exposed to a high number of ads.

Ironically, the main reason for drop in CTR is the success of online display advertising, with the increase in the number of online ad impressions outpacing the rise in clicks by consumers. The CTR is only a partial measure of success -- about 20% of conversions are the result of a click. Advertisers can improve campaign performance with various steps such as targeted content, utilizing large standard banners, use of creative algorithms to boost CTR and retargeting.

Click-through rates have been declining during the past decade, with the greatest decrease of 18% occurring during the financial crisis. Yet in 2009 and 2010, this decline appears to have stopped. Both in 2009 and the first eight months of 2010, average CTRs remained around 0.09%. This indicates that online advertising performance has reached what MediaMind calls "equilibrium."

What caused this decline in CTR in the first place? Evidence shows that the success of online advertising has oddly been the prime cause for the decline in CTR performance, according to the report. As more budgets poured into display, users were exposed to more and more ads. The number of ads a user clicked on did not catch up with the number of ads users viewed, so it reduced the overall CTR.

Research by comScore suggests that two-thirds of Internet users do not click on any display ads during the course of a month, and only 16% of Internet users account for 80% of all clicks. It also indicates that display advertising continues to have an influence on user behavior even at low CTRs.

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