Death of the CTR

Since the dawn of online advertising, the gold standard of effectiveness has been the CTR. This has made a lot of sense, since for the first time ever, adertisers could leverage technology to figure out exactly how well they were communicating. A user would click, and that click would be recorded. The total number of clicks is compared against the total number of ads that are put on the screen, and bingo, you know exactly how effective the campaign was. Combine that number with more advanced analytics, such as tracking the user past the initial click, onto the advertiser’s site, and onto really interesting places, like the confirmation page of an ecommerce site. This gave advertisers really effective ways to quantify the effectiveness of a campaign.

What has been more difficult to quantify is the value of advertising in creating engagement and awareness. Simply seeing a brand association between host site and banner advertisement creates awareness of a brand. Seeing a banner ad doesn’t necessarily trigger immediate reactions (clicks), but can trigger actions of the user later. Users may be inclined to purchase products later on because of the brand awareness created by seeing banner ads. This is awesome for advertisers, who get a return, albeit indirect, from banner advertising, but it’s far less awesome for publishers. That publisher put a great deal of work to create content that people want to see, and advertising fees are very common way of monetizng that work. However, CPMs are commonly determined by CTR. If that publisher has a lousy CTR, as a result of something terrible, like having a savvy demographic that knows not to click on ads, then that publisher suffers.

Microsoft has long been a proponent of measuring engagement, and Google has recently mentioned rolling out tools that will track a user across sessions on multiple sites. It’s clear that the industry needs to move in this direction, although hopefully it will move slowly and find ways to avoid becoming a ubiquitous, Minority Report-style system where Skynet knows who you are, and will show you ads for Banana Republic after you’ve purchased khakis from the Gap. However, the rewards for publishers could be great if the larger players in the industry were able to track users across websites, and even devices.

May 31st, 2010