Online advertising remains mired in a slump, as evidenced by earnings reports from DoubleClick and Yahoo, both of which said they don't see things turning around anytime soon.
Word that an ad rebound won't come until at least mid-2002 is bad news for companies dependent on online ads for revenue. But at least one company is trying to change the way advertisers look at the Internet and, in turn, change the way they value their online ads.
Click-throughs have been one of the standard ways to measure the effectiveness of online ads. They allow advertisers to track not just how many people see a particular ad, but how many are engaged enough to "click through" to the underlying Web site.
Compared with traditional advertising, click-throughs were a major breakthrough. Advertisers could see not just how many people saw their ads, but get hard data on how well those ads worked. And by tying advertising fees to click-through performance--cost per thousand is a standard measurement rate--advertisers could guarantee that they paid only for ads that worked.
But as click-through rates have declined, sites dependent on advertising have taken it on the chin. Now CBS MarketWatch is looking to try something different.
Starting this week, the dot-com said it would no longer automatically provide click-through data to its advertisers. Instead, the company is asking advertisers to reevaluate why and how they work on the Web and examine other performance metrics, such as brand or product awareness or post-viewing measurements.
"Click-through rates are a misleading statistic," said Scot McLernon, executive vice president of sales at MarketWatch. "They aren't indicative of raised awareness of consumer interest."
On a conference call with analysts, DoubleClick CEO Kevin Ryan said MarketWatch's move is a sign of things to come. "This is a leading trend I think we'll see throughout the industry," he said. The idea is to get advertisers to look at the Internet as a passive medium, where branding is as important as interaction.
A change of heart
To some degree, that theory goes against much of what has been the major selling point of online advertising. During the heyday of online content sites, advertisers were told that online ads would redefine the business, because for the first time, consumers would be able to interact with a company and not just passively view messages.
Not only that, but advertisers were promised that they would be able to get precise measurements of just how their ads were viewed by consumers. Imagine if a magazine could tell its advertisers whether readers read individual ads or just flipped past them.
Getting that level of data is fairly difficult in the offline world. Take, for instance, TV viewing. The challenge of the empty room--where the TV is on but no one is watching--is a problem that ratings companies are still trying to figure out.
With the Internet, though, that problem was supposed to be solved. So why are Internet companies turning their backs on click-throughs?
Advertisers were so used to click-throughs that they continued to monitor the statistic, even when their objectives involved increasing awareness or improving a brand's image, said Robin Webster, CEO of the Interactive Advertising Bureau.
"What does the click have to do with any of those situations? It really has nothing to do with it," she said. "I applaud their leadership move in this."
But some of the backlash against click-throughs is clearly tied to their declining value for Internet companies. After all, if you were paid according to a measurement that kept getting lower, you'd want to look for a new measurement method as well.
"Many, many sites, when they were putting out their collateral for the last three years, were putting out how great the click-through rates were," said Jupiter Media Metrix analyst Rudy Grahn.
Now that click-through rates are dropping, "the online publisher is getting pummeled," he said. "They're being measured to a degree that no other medium is and held responsible for performance of ad campaigns to a degree that no other media channel is. The sets of expectations placed on online publishers are irrational."
Only 15 percent of marketers online are doing any sort of formal branding measurement, while 60 percent watch click-through data, Grahn said. But traditional effectiveness measurements are equally important online. And someday soon, companies may be able to charge advertisers that way.
"If you look at the evolution, first we saw (click-throughs), then we saw that migrate toward cost per acquisition," said Jefferies analyst Michael Legg. "Now what we're really saying is, 'We'll give you performance metrics to show you how well this works, and over time, we'll develop a method for charging you.'"