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What's a Good Click Rate for a Banner Ad?

by Zsolt Kerekes, editor StorageSearch.com

"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 asked just before writing this article... My answer is not a number, or percentage. "It depends on your market and your products."

(In January 2010 - the highest performing SSD banner ads running on my publications are getting between 1.0% and 4.5% click rate. Generally static banners perform better than animated - because the entire message is seen at once. Depends on the message of course... see more about this in - Think of Web Ads as Signposts.)

This is ACSL's 13th 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.


...Later:- if you really want to see something which goes a lot deeper into banner ad effectiveness - take a look at the PhD thesis of Dr. Michelle Anne Toon - A Study Of On-Line Use and Perceived Effectiveness of Compliance-Gaining in Health-Related Banner Advertisements for Senior Citizens (pdf) - which includes a quote from my article.

As I was being dozy - it took me 8 years to discover that paper - which is dated December 2002. Hopefully you'll do a better job looking at who links to your own sites.

MarketingViews.com FAQs for connected IT marketers

Later... More about banner ads..................................
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.


...Later:- in January 2009 - I had an advertiser who was happy with the click rate for their new banner. But I suspected that they could do much better - because of the high interest in that subject in our editorial.

I suggested some simple changes which reduced the complexity of their banner, retained the text of their core message, and increased the click rate to 6x the level before.

Nice to know I still have the knack of understanding micro communications.

That's the best way to think about banner ads... micro editorial with guaranteed delivery. So it's worth paying more attention to how readers perceive them. Leaving this important task in the hands of graphics designers is lunacy. Yes - they should do the implementation - but the direction has to be given from the highest level marketer in your company. Because what you learn from testing banner ads - often results in you having to change the way you talk about your company in other places... your web site, your PR.

The success you can get from reapplying what you learn from testing banner ads back into all your corporate communications means that its value is orders of magnitude more than you think.
Zsolt Kerekes - Publisher
Zsolt Kerekes, is the editor of STORAGEsearch.com
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Later - how do banner ads compare with Google ads?
I've been running our own proprietary web ads since 1996.

I was surprised to get a phone call from Google about 5 years ago to ask if I was interested in running their ads. They could see from their search data that we had a lot of content and readers.

But from what they said about industry average ad rates I didn't think that Google ads would be a good business model for my publications. So I declined to pursue that idea at the time.

But in 2009 - after reading a book about how some web 3 businesses had funded themselves using Google ads instead of venture capital - I decided my earlier prejudice against Google ads might be wrong. So I decided to test this theory.

Click rates below are based on testing in StorageSearch.com in the 4th quarter of 2009.


AdSense for Content - 0.37%

This used the same size ad footprint and same placement as our banner ads.

AdSense produced much lower click rates than banner ads.

Also the value of the AdSense ads was 2 orders of magnitude lower than we get from sustainable banner ads.

Part of the reason for the low click rate - is that Google is not as good at delivering contextually relevant ads - as you would expect from reading its FAQs pages.

Another explanation may be - that due to its preliminary poor economic results - I didn't invest much time in understanding how to improve the performance of the AdSense ads.


AdSense for Search - 4.14%

This click rate is similar to the best results we get for running banner ads.

But there are 2 downsides.

1 - the revenue delivered from AdSense are an order of magnitude lower then our other ad alternatives.

2 - the footprint in an AdSense ad is a larger percentage of the browser area than a banner. But the click rate is the same. Therefore the economic performance - compared to running 3 or 4 banners on a single page to get the same ad area - is lower.


Conclusions - re Google ads

Google ads are not a viable business choice for our publications. But I will continue low level testing - mostly of AdSense for Search - to see if we can get better results.


Conclusions - re all types of ads

Getting high click rates - for any type of ads - in the region 3% to 4.5% are a sign that publishers are running ads which are relevant to their readers.

My view is that it is better to run no ads at all on a page - than to run ads which are likely to irritate my readers.

Click rates are a useful indicator in this regard for a publisher.

But I always remind my advertisers (and they remind me) that what counts - is the change in business activity which they see - related to their advertising.
Marketing Views STORAGEsearch SPARC Product Directory ACSL - the publisher