I refuse to punch the monkey

Christmas is rushing toward us and so is the e-commerce onslaught. And you can bet that after the collapse of the dot-com world earlier this year this online season will be watched ultracarefully for trends, performance and growth. Which leads me to the topic of online advertising.

Despite the significant increase in online advertising expenditures this year, all signs indicate that the primary online advertising mechanism, banner ads, just don't cut it. Even Yahoo, after announcing earnings a few weeks ago, saw its share price fall because of the company's reliance on revenue from banner advertising.

Is this any surprise? Banner ads today are too numerous and generally too boring. I think it's interesting that over the past few years we've seen the average click-through rate (CTR) drop from a few percent to around 0.5%. Obviously the novelty factor has worn off, and consumers now perceive banner ads the way they see ads in magazines or, rather, the way they don't see them.

Consumers don't skip over banner ads because they're too small. On the contrary, full-banner and half-banner ads (defined by the Internet Advertising Board as 468 by 60 pixels and 234 by 60 pixels, respectively) dominate most pages, even at high screen resolutions. As soon as your average user sees a great, animated visual road bump at the top of a Web page he simply skips down to the real content.

So why don't Web sites use smaller, less-intrusive ads? If you talk to the advertising networks they'll tell you they only have a tiny inventory of the small ads. They claim advertising agencies aren't as interested in the smaller sizes, so they don't put as much effort into selling them. But wait a minute. They don't sell the smaller sizes, so of course they have no inventory - can you say "vicious circle"?

And then there's all the talk about targeting ads to increase the relevance of what is being advertised. So far it seems to be just that - talk. The majority of ads I see are obviously not targeted at me at all. This is not surprising, as the advertising networks admit to delivering only a very small fraction of their inventory on a targeted basis.

All the studies of banner ad effectiveness show much the same things: the word "free" increases CTRs as does animation and controlled use of color. But even when a banner ad is well-constructed, it is still very similar to an ad you'd find on paper, and therein lies the problem - new medium, old thinking.

And the old media thinking is getting more prevalent as the Internet becomes more capable of delivering big content - look at the number of Web sites that now greet you with a flash presentation that is essentially a TV ad.

Of course, this sequence of static to animated banner ads followed by flashmercials is absolutely to be expected - it is an evolutionary process, and just because we have new media doesn't mean that old media thinking will be skipped as we come to grips with what can be done.

However, what we need to engage consumers in is commercial messaging (as opposed to "advertising") that is "in context." That means the message has to be related to the content and your interests.

How much of a mistake is it to advertise, "Punch the monkey" (which I refuse to do on principle) on a page discussing the benefits of an insurance policy?

I don't think we'll see anything different in online advertising this Christmas, and I doubt whether change will, or can, come quickly. But come it must because if it doesn't, those CTRs will just continue to plummet.

Advertise your thoughts to nwcolumn@gibbs.com.