I am frequently asked to share my thoughts about banner advertising. Either the owners of a business would like to sell banner ad space as a source of revenue-generation on their websites, or business owners want to get their share of the “enormous” volume of traffic that will be generated by placing their own banner ads on high profile sites. These business owners have been sold a bill of goods about the fortunes waiting to be made through banner advertising, the Internet’s modern-day equivalent of the old story of the streets being paved with gold. Don’t fall for it.

If you are contemplating the placement of banner ads on another site, keep in mind that the people who are most likely to profit from your expenditures will be the people who will take your money to produce the ads or the hucksters selling the banner space with unsubstantiated promises of page views and impressions. If you are contemplating the addition of banner advertising to your own site, as a means of revenue generation, consider the costs of cluttering your site, with the result that both your website’s primary content and your business itself begin to hemorrhage credibility. It is a fact that websites with banner advertising have a lower trust factor in the eyes of consumers, with a corresponding decrease in perception as a source of either information or product reliability. The problem is that very few people are willing to admit to this “dirty little secret”.

As Marko Saric recently posted in his blog, “traditional banner ads take away from the user experience. They distract users and because of that users tend to ignore ads.” He goes on to reference the proven phenomenon called “Banner Blindness”. This term was coined by Dr. Jakob Nielsen back in August of 2007. For those who may be unfamiliar with Jakob Nielsen (and why his research is so highly creditable), he has been called “the guru of Web page usability” by The New York Times, “the world’s leading expert on Web usability” by U.S. News & World Report, “one of the top 10 minds in small business” by Fortune Small Business, and “one of the world’s foremost experts in Web usability” by Business Week.

In his study of banner advertising that first coined the term “Banner Blindness”, Dr. Nielsen summarizes that users rarely look at website display ads, and that the most common methods of increasing the effectiveness of banner advertising is to engage in deceptive practices to trick users into clicking, for example by incorporating fake “OK” or “Cancel” buttons into the ads. His earlier studies have shown that such online ads are either “very negatively” or “negatively” perceived by 94% of Web users, just 1 percentage point behind universally hated pop-up ads. His studies further concluded that, when users dislike online advertising, they “transfer their dislike to the advertisers behind the ad and to the website that exposed them to it.”

Getting back to Banner Blindness, Dr. Nielsen conducted extensive eyetracking studies that have conclusively proven that users “almost never look at anything that looks like an advertisement.” In a 2003 survey conducted by PlanetFeedback, only 8% of U.S. consumers responded that they trusted banner ads (right behind infomercials, but ahead of door-to-door salesmen, spam, and pop-up ads) and 53% responded that they were annoyed by banner ads.

Substantiating this research, a study published in BusinessWeek in November of 2007, titled “So Many Ads, So Few Clicks”, reports that “the truth about online ads is that precious few people actually click on them. And the percentage of people who respond to common banner ads … is shrinking steadily”, with the average click-through rate having fallen to 0.2% in March of 2007 after several years of decline. The results of this study have been substantiated elsewhere in other independent research. Consider this if you are an advertiser, or contemplate joining the pack, since most advertisers pay based upon the number of impressions rather than clicks. It doesn’t take a mathematician to conclude that these ads do not represent a very sound investment.

Finally, if you are thinking about adding banner advertising to your own website as a source of revenue generation, consider the professional advice of Dr. Ralph F. Wilson, who suggests that you “crunch the numbers” before jumping onto the bandwagon. Based upon a combination of monthly page views and the cost per thousand impressions that you might be able to charge for your banner advertising space, your site will have to be generating an enormous amount of traffic (in the hundreds of thousands or even millions of page views per month) before your site would begin to generate any sizeable amount of income from the sale of banner advertising space.

Consider the cost of compromising your online integrity through the use of advertising that users both ignore and find annoying. Whether you are thinking about selling banner ads or buying banner ads, there are simply far more effective ways of growing your business online.

Additional references:
http://gigaom.com/2008/10/14/what-if-you-ran-an-ad-and-nobody-saw-it/
http://www.techdirt.com/blog.php?tag=banner+ads