Thoughts on interactive advertising and digital marketing.


Clickthrough rate - A flawed metric

August 23, 2004

What is Click-through Rate?

Click-through (CTR) is simply a measure of the number of clicks received by an ad divided by the number of times that ad was displayed. Many people in the interactive advertising industry gauge the success of campaigns using this measure alone, often incorrectly. Let me explain why this is so.

The number of clicks received by a display banner ad is a function of many factors. Some of them are:

1. Relevance - The ad has to be relevant to the target audience. For example, an ad for a sale happening in New York wouldn't be interesting for a person in New Delhi. In addition to geography, relevance can be demographic, cultural or even attitudinal.

2. The product / brand - A prospective banking customer would be more likely to click on a Citibank ad rather than a North Coast Liberal bank ad, simply because she will be more knowledgeable about the former. As such, display campaigns of strong brands perform much better than relatively unknown competitors because of the brand recall, loyalty and other brand preferences.

3. The offer - If the ad communicates an offer that has higher perceived value to the prospect, the response rate will go up proportionately. This means response to a vanilla ad will be lesser than one with a promotion offer, as the prospect is incentivized for taking the action to click on the ad.

4. The message / creative - The offer has to be communicated briefly and clearly to the prospect, in the limited time that the banner registers in the mind of the reader. Long-winding, slow animations usually perform poorly because the reader's attention might have shifted elsewhere.

Click-through is but one of the many metrics that can be used to measure online ad campaigns, but it is not the only one. Display campaigns have the potential to be more than mere direct response mechanisms, and it is high time we started treating it as such.

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Adrelevance - The origin of the word

August 10, 2004

Almost all media is based on a very simple concept. The publisher (the first party), provides content to the reader (the second party), either completely free or at a substantially lower cost. This is made possible by the support of the advertiser (the third party), who in turn gets an opportunity to market his product or service to the reader. The publisher gets paid by the advertiser, who gets access to a prospective customer in the reader. Everyone wins.

However, there is a problem. In most traditional media models, advertising is an interruption to the user experience. Be this the 30 second spot in television programming, the doublespread ads in the glossy magazine or the annoying pop-up ad on her favourite website, the user has to suffer a break in the content experience. If it gets really bad, she may never watch that sitcom or read that magazine or visit that website again. Without the reader, the publisher has no audience to sell to the advertiser, who stops paying. The model breaks down. Everyone loses.

Ads are an interruption if they are irrelevant. Instead, if they are targeted and deliver messages that are meaningful and contextually relevant, they are no more an interruption. (Details on the various types of targeting will be dealt in a later article.) Instead, they supplement the value of the content and thereby serves the purpose of all three parties well.

Advertising is an integral element of the current media model and is evolving at a breakneck speed. This blog will discuss various aspects of advertising, mainly concentrating on interactive advertising. Starting with the fundamental concepts, it will track the most recent developments in the industry and try to find the method in the madness.

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