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Determinants of internet advertising effectiveness: an empirical study.

Article Excerpt
This paper considers the structure of advertising effectiveness on the internet. It investigates empirically the importance of creative and media factors for banner effectiveness. Econometric modelling of actual data on banner ads demonstrates that creative factors such as banner size, animation, message length and logos, as well as media factors such as campaign length, number of host websites, use of offline media, and campaign cost, may influence the direct response of the target audience as measured by click-through rates. The results lead to important practical implications for internet advertising.

Introduction

Advertising on the internet began in the middle of the past decade, when the first banner advertisements were placed in commercial websites (Zeff & Aronson 1999). Although there are several forms of internet advertising, such as banners, interstitials and pop-up windows, banner ads are the most prevalent. Banner ads have dominated web advertising and become the standard advertising format on the internet (Cho et al. 2001).

Banner advertisements are rectangular displays on a web page that serve as a lead-in to the visitor to find out more by clicking on the banner (Raman & Leckenby 1998). Clicking on the banner takes the visitor from the current web page to the advertiser's web page. In this manner, banner ads are used as vehicles to bring prospective customers to a site, offering an automated link to the advertiser (Briggs & Hollis 1997; Bellizzi 2000). Clickable banner ads are believed to be the first gateway to entering the world of interactive electronic markets (Shamdasani et al. 2001).

A widely used measure for evaluating the effectiveness of banner advertising is the click-through rate--that is, the proportion of viewers who click on a banner to visit the advertiser's website (Hanson 2000). It should be noted, however, that the advertising industry also uses alternative, well-established measures of banner success, such as acquisitions, branding and image change. The attraction of the click-through variable lies in its behavioural nature, its measurability, and the fact that it indicates immediate interest (Briggs & Hollis 1997). It is noteworthy that the pricing of internet advertising is often based on click-through rates because advertisers demand results-oriented pricing and question the pricing model of traditional media, which is based on mere impressions; rather, they insist on paying for direct response results (Hofacker & Murphy 1998; Cho et al. 2001). It has been suggested that there is an explicit shift in online advertising strategy that favours deriving behavioural response from selected target audiences over providing exposure to many audience groups (Yoon & Kim 2001). These trends increase the importance of a banner's ability to induce direct responses and emphasise the problem of effective creative design and media planning (Shamdasani et al. 2001).

Tracking direct response results on the internet is simple since response information is electronically captured and reported through the ad serving process as well as by tracking visitors' activity once they have reached a site. In this manner, direct response data offer a great opportunity to empirically establish ad effect relationships (Broussard 2000).

However, click-though rates vary owing to various and largely unknown factors related to design, execution and context of banner campaigns. Therefore, knowing about...

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