There is a great deal of controversy about the effectiveness of banners. Some people swear by them, others swear at them, saying they don't work worth a darn. Although click-through rates have gone consistently downward, the same can be said of banner ad prices. The average click-through rate hovers somewhere around 0.5% range for banner ads. But, with a good banner design and placement it is still possible to achieve a good return on investment, by combining below-average ad rates and above-average response rates.

Banner ads are sold in any one of three ways: cost per 1,000 impressions (CPM), pay per click (PPC), or pay per action (PPA).

Buying a PPC banner is usually more expensive than the CPM basis, but can be much more effective because people actually take some kind of action by clicking though to your site. One of the drawbacks to PPC banner advertising is that one person may click on an ad more than once and you get charged for each click. However some ad providers track IP address, and only charge one click per computer per day. Most places though don't do this for the simple reason that it means less money in their pocket.

The effectiveness of cost per impression banners can vary quite a bit, depending upon their placement on the webpage and you typically (not always) pay the same whether the banner is displayed prominently at the top of the page, or hidden in a bottom corner. Most CPM banner sites rotate the banners throughout the site (Run of Site - ROS) and throughout the page. Banner ads to reach general audiences are typically priced at $1 to $10 CPM, while targeted sites may get CPM rates of $30 - $50 or more. Even though it may not seem like much, banner ads can be quite expensive. Do the math with me:

If you're paying $10 CPM and the click-through rate is an industry average of 0.5%, then it costs you $10 to get 5 people to your site, or $2 per person. If 2% of the visitors to your site make a purchase, then your customer acquisition cost (CAC) is $100, ($2 / 2%). That means for every transaction you do you need to pay out $100 in advertising fees. Some websites don't even manage to convert 2% of visitors into customers, especially when they originate from a banner ad.

In order for banner ads to be effective, you need to combine above average click-through rates, with below average banner prices and sell either a high-ticket product, a product with a high markup (like an info product) or have a strong back-end in place so you make money on the second, third, fourth and even twentieth sale.

Pay per action banners are usually the most expensive, since you pay only for a desired action. This can be a product sale, having someone sign up for an email list or any other action you want. PPA banners can be very similar to an affiliate program and use the same type of tracking.

Banner Exchanges

Just like link swapping, some companies have banner swapping programs. Most banner swapping programs are free and some might require you to pay a monthly administration fee so they can cover their costs.

Many of the free companies make money by the in-proportionate ratio of banners you display on your site, vs. your banners being displayed on other sites. Let's say you need to place a certain banner on your site for a total 10,000 impressions, but you only get 8,000 impressions of your banner on someone else's site in return. This is how these sites fund themselves. They sell the extra 2,000 impressions you lose, for a profit.

Some banner exchanges are pure and simple; I'll put your banner on my site, if you put mine on yours. There's absolutely nothing wrong with this if both sites are of a similar interest and get comparatively the same amount of traffic.

Some sites will track your stats and some will allow you to upload multiple banners so they can be rotated throughout the sites where are placed. This way you can determine what works best if you're paying per impression. It's also always a good idea to use your own ad tracker so you can follow the click-throughs to your site and see how many actually lead to a sale.

Some banner exchange companies will actually design the banner for you as part of their program. Although I suggest you design, (or have designed) your own banners. If you are going to let the banner exchange company design it for you, make sure it is on target. Some of these companies use software that automatically creates your banner untouched by human hands and unseen by human eyes, until it gets to yours. As with any type of advertising, the design, wording and call to action of your banner is quite important.

Since the purpose of a banner is to stop, interrupt really, the surfer's train of thought, clicking on a banner is an impulse decision. People need a reason to make an impulse decision so you need to give them one. The following are some tips to help generate the highest click-through rate possible:

- Have a call to action. Always say "click here" on your banner, or some variation thereof. I know this sounds overly simple, but it is often overlooked and can easily double your click-through rates.

- Add a button. Placing the words 'click here' into an actual or obvious button on your banner improves response.

- There's no room for subtlety in banners. Your banner should scream your message.

- Try posing questions: "Want to save 15% on your car insurance in 15 minutes?" Questions work better than statements, particularly when they're used to tease your audience. Studies have shown that by changing a statement to a question you can raise your click-through rate by 16%.

- If appropriate use humor. Make sure it's actually funny and get some others opinions first. Quite often something that might be funny to you, other people may not get.

- Use bright primary colors. Brighter colors attract visitor's eyes. Blue, green, and yellow elicit the most click-throughs. Stay away from transparent colors either in the foreground or background - they tend to get lost among the colors of most websites so stick with solids.

- Use simple animation. Moving images and blinking animation attract visitors to your banner. Strategic use of movement grabs attention more effectively than static banners. Don't make them too wild or complicated so the message gets lost, the senses are overloaded and/or the file size is too large.

- Offer a reward or free gift when someone clicks on your banner. It will help motivate people to click. Contests also work well, especially if you're giving away money. Money is the biggest motivator.

- Run a series of banners. It may take more than one message to tell your story or to go after a particular market. Run a series of banners and vary your message. Keep you message consistent and catchy to make your visitors want to read further. After the fourth impression of the same banner, most people tend to subconsciously block it out in their mind.

- Keep the copy short. Think billboard advertising - the average person spends six seconds looking at a billboard and you have less than a third of that time on the web. Write compelling copy. Use action words that motivate.

- Use italics if you can. Although they don't have a huge impact, they can increase click-through rates by a few percentage points when compared with standard typefaces.

- Create curiosity. A large number of those who click on ads do so because they are curious. Studies show that curious clickers very widely by demographic and other characteristics, so targeting based on curiosity can be very effective when you have a general interest product or service.

- Use wide banners or tall skyscraper banners. They're clicked on significantly more than smaller, skinnier, or square banners.

- Make your banner file size is small, so it loads quickly; 10-30kb is typical for a 468 by 60 pixel banner.

Some Tips on Implementing Banner Ad Campaigns

First, determine if you think it would be worth it to participate in a banner ad campaign. Consider the banner costs, compared to an average click-through rate of half a percent, your sites' conversion rate, profit margins and customer's LOV (lifetime of value).

Determine where and on what sites you want to consider placing your banner ads, taking into consideration the cost, banner placement, payment types (PPC, CPM, PPA) and if it's a targeted site or not. Find some websites that complement yours.

Contact the site on which you wish to place your ad and ask if they have a rate card and get info on their payment options. You can also see if they offer any specials or discounts if you purchase in bulk, or even simply ask for a better deal. A lot of the time they will give you one simply because you asked.

Read the submission guidelines. This usually covers things like:

- Maximum file size
- File types accepted (commonly .gif, .jpg and flash - .swf)
- Accepted banner sizes
- Deadlines for submission and review
- How many banners can you submit for rotating campaigns? How often do they rotate the banners?
- How do they determine where your banner is placed on each page?
- Do you pay for placement or is it random?

Keep track of all your banner statistics. Even though the company you are advertising with may do this for you, it's also a good idea to track it yourself. This way you can track and determine results like your conversion rate, ROI, CPC (cost per click) and click-through rate for each banner.

All in all, banner advertising can be a key part of your online marketing campaign. Depending on all of the key factors mentioned above, it may or may not be a financially feasible part of your marketing campaign, if it can make you a profit. If it can't, don't sweat it, there's tons of other ways to cost effectively market your business online.

Justin Michie is a well respected Internet Marketer and author of the most up to date and comprehensive Internet Marketing Book available: Street Smart Internet Marketing.

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