"What's a Good Click
Rate for a Banner Ad?"
As a publisher I'm often asked
that question by my advertisers. "Is 3% good?" I was recently asked...
My answer is not a number, or percentage. "It depends on your market and
your products."
This is
ACSL's 12th year
as a dotcom publisher, and in that time we've run countless millions of banner
ad impressions. So we have plenty of data. Let me take you through the math.
Real
life banner click rates on STORAGEsearch
and
SPARC Product Directory
typically occur in the range 0.5% to 7%. The average (all clicks divided by all
impressions) is over 1.5%. Incidentally, we've seen click rates rising during
the last few years, as advertisers get more responsive to the feedback we
supply, and design ads with better targeted messages which take into account the
already segmented nature of our readerships.
Cost per click. On
our sites, an advertiser buying for example 100,000 impression price point, pays
2 cents an impression. If we assume a 1% click rate, then the cost of a click to
your web site is $2. If we assume that just one in a hundred of those visitors
(1% of the 1% visitors) are convertible into customers, that's a customer
acquisition cost of $200. (That's not the whole story, because there's a
branding benefit and we see that running banner ads increases the effectiveness
of classified web ads on the same sites.) But let's just work with this $200
cost.
Is it worth it? For many of the products advertised on
our sites such as rackmount solid state disks, RAID systems, rackmount Sun
servers, military systems etc, a typical entry level system price ranges from
$10,000 to about $100,000. So it's easy to see that this is a sustainable
process. And actually, most customers are in the market for multiple systems.
But how does this work out for lower cost products? - such as
cables or adapter cards, where the average price of the product can be in the
range $10 to $500? Surely, you think, our advertisers must go broke, if their
customer acquisition costs are so high. Well, I can reassure you that they
don't. And there are 2 reasons why.
- most of the advertisers for the lower priced products run targeted banner
ads, so their typical click rates are in the region of 3% to 4%. Let's say a
typical customer acquistion cost of about $50.
- this is the important part! The economics of banner advertising (as
with all direct marketing) are based on the lifetime value of the customer.
Advertisers of these lower cost products have often commented that an individual
sale of SCSI cables, adapters, GBICs or whatever to a new customer who may be a
reseller or systems integrator can be over $20,000. And most end user
organisations are in the market for mutiple products, either in one order, or
over time.
As a publisher, I try to understand the economics of
potential new customers, and I often decline advertising orders, if the product
profile is that the customer just buys one off a low value product, with little
or no repeat potential. I would waste my time by accepting new customers with
that kind of business, because it won't be sustainable.
So going back
to the original question..."What's a Good Click Rate for a Banner Ad?"
the answer is - it depends on your product, your market, your customers, and
just as important, the characteristics of the publication you advertise in. It's
worth paying $2 a click for the right customers.
...Later:-
Many advertisers say that the leads they get from our sites are higher quality
than those from Google or other publications. They look at more pages and are
more likely to generate a request for quote.
Maybe that's why in the
summer of 2007 - all our projected banner capacity for the following 6 months
had already been sold to existing advertisers. |
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| Later..................................... |
Sometimes
there is a problem with the design of the banner ad itself.
The
message is not clear, or maybe the design interferes with the message. Usually
testing a couple of design iterations will result in a workhorse solution
which can also be run on other sites. Now and then, however, the process just
gets stuck in a rut.
In January 2003 we had a new advertiser whose
initial banner ad (designed by an agency) didn't work very well. It looked OK to
me and to our advertiser, but the click rate (less than 0.1%) sucked. Our
readers just didn't get it.
3 agency redesigns later, and the banner
still wasn't working.
It wasn't the agency's fault. The banners looked great - but maybe
they were trying to say too much.
So I decided to design a banner
myself, using the knowledge I had about the advertiser and their positioning.
The new design is getting a 1.2% click rate. Not very high, but good enough
for this promotion.
This was a situation where, we as a publisher, had
to step in and help. It doesn't happen very often, maybe once or twice a year.
I've tracked the performance of over 4,000 banner designs. That
experience is always available to help our customers understand what's
happening.
How much did we charge this customer for designing a legacy
banner?
Nothing. It's all part of the service.
Even later...
our customer's design agency took our design of banner and tweaked it. This new
version is now performing best of all.
More recently - in Q4 2007 - I helped an advertiser increases its
banner click rate from 0.6% to over 1.3% (and 5 months later - in Feb 2008 - it
was still getting the higher rate).
Better still - the customer
signup and conversion rate at their end went up by a much bigger factor than
that doubling of the click rate alone implies. Because the new banner message
was much more relevant to their target customers. | |
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