The advertising problem of the Web industry: banner ads

Like TechCrunch I too noticed that Yahoo dropped like a rock today and wondered what that means for Silicon Valley. Why is Yahoo in peril here? Banner ads.

Ford, for instance, has literally stopped spending anything on non discretionary things. Just one company can have a huge impact.

So, what’s discretionary? Banner ads.

You know, those colorful banners that you’ll see on lots of sites, particularly old-school sites.

So, why isn’t Google seeing a huge drop like Yahoo did? Easy. Google’s income relies on text ads that only pay when people click on them.

Those “cost per click” kinds of ads are NOT discretionary.

This reminds me of the 1980s when I helped do the advertising for LZ Premiums, a now-defunct camera/appliance store in Silicon Valley. Advertising for us back then in the Mercury News was discretionary. We did it only when we had some money from a camera manufacturer that was slated for advertising. Our ad in the Yellow Pages, though, was NOT discretionary. Do that and your business would almost stop.

Google is the new Yellow Pages. If a business stops doing Google advertising it might as well just fire everyone and send them home.

That’s the difference between the advertising world today and the advertising world back in 1999.

Back then we didn’t have any advertising types that weren’t discretionary. Search the word “car” on Google for instance, and you’ll still see GM advertising there.

In a recession I think Google will even see MORE advertising as businesses get more desperate to find buyers.

Hint: banner advertising doesn’t bring buyers (at least not provably so). Text ads do.

Winner here? Google. Which is why Google is only down a couple percent today while Yahoo is down 13%.

66 thoughts on “The advertising problem of the Web industry: banner ads

  1. What happened to yahoo? Well a lot of their advertising was paid by people that were chatting. In fact, yahoo had more bots chatting then people but refused to fix it. Not only did some ads refuse to download to messenger but they took over the whole page when they did. Now yahoo fixed it, actualy just part of it, after all the reliable chatters left.

  2. What happened to yahoo? Well a lot of their advertising was paid by people that were chatting. In fact, yahoo had more bots chatting then people but refused to fix it. Not only did some ads refuse to download to messenger but they took over the whole page when they did. Now yahoo fixed it, actualy just part of it, after all the reliable chatters left.

  3. I am a small business owner and do much of my business online. For years, I had Yahoo as my home page. Their banner adds are driving me crazy. I actually have to hit refresh up to 6 times because the new mail page will load the banner and say “Done” – won’t load the mail! I have moved my home page to Google – but have to keep the Yahoo e-mail because I have had it so long. But just because customers are keeping Yahoo mail doesn’t mean they LIKE it. We HATE Yahoo AND their banner ads! I doubt that’s what they intended when they started putting that mess on their sites – but that’s what they got – ALL of their customers looking for another place to jump to.

  4. I am a small business owner and do much of my business online. For years, I had Yahoo as my home page. Their banner adds are driving me crazy. I actually have to hit refresh up to 6 times because the new mail page will load the banner and say “Done” – won’t load the mail! I have moved my home page to Google – but have to keep the Yahoo e-mail because I have had it so long. But just because customers are keeping Yahoo mail doesn’t mean they LIKE it. We HATE Yahoo AND their banner ads! I doubt that’s what they intended when they started putting that mess on their sites – but that’s what they got – ALL of their customers looking for another place to jump to.

  5. As a consumer, I am sick of banner ads slowing my web experience to a crawl. The only way I know to put in my 2 cents is to NEVER click on an internet ad of ANY kind. If the buying public would abstain for just 30 days, we could break this mess up.

  6. As a consumer, I am sick of banner ads slowing my web experience to a crawl. The only way I know to put in my 2 cents is to NEVER click on an internet ad of ANY kind. If the buying public would abstain for just 30 days, we could break this mess up.

  7. To #30:

    They are already less effective. I used to use Yahoo as my start page, even after Google became more popular for search. I liked being able to set my color scheme, 3 columns, news, weather and feeds just a certain way and Yahoo provided all of that. But they also got slower and slower as the ads contained fancier graphics, got physically bigger and started using Flash animations, Javascript, etc. These ads typically come from servers different than those providing the actual news content and at times those ad servers were slow, or down completely. I’d see a blank page and a status message saying something like “Waiting for adserv2.yahoo.com”. That’s about the time ad blocking software got really popular and I suspect some of the thinking at Yahoo was along the lines of “if you aren’t going to view our ads we won’t show you the rest of it either”. Some ad blocking software can get around this, and a combination of pop-up blocking in firefox plus a “hosts” file with the most popular few hundred ad servers pointing to a fake IP adddress makes Yahoo and a lot of other pages load right snappily, with the spaces reserved for the ad (unfortunately these days about half the page) either blank or some error message. But at least you get to see the content that brought you to the page in the first place. Can Yahoo measure the number of people (like me) who view their content but are totally unaware of the ads? Do they want to share that information with their advertising customers (or have those customers figured it out on their own)? I wonder.

    When Google came out with their personalized home page I switched quickly. There ARE NO ads on that page. Nothing to block, nothing to slow things down. There are of course targeted ads in Gmail, and on search results page. If Google knows what you are searching for, or know the subject of an e-mail message they will match ads to it, and on many occasions I’ve clicked thought to the advertisers site because of that fact. That HAS to be worth a lot more to an advertiser than anything Yahoo is providing. More importantly though, graphics or no graphics, the ad and the content are QUICKLY combined onto a single page coming from a single server. I’m not sure I could block them if I wanted to, and as long as they don’t take up too much space or slow things down, there is no reason to block them.

    I suspect part of Yahoo’s problem (and this may apply to MS too) is that they have already sold their customers on these splashy ads, and now they have to serve them up. Could they go back to those customers and say, hey, how about we replace your nice Flash presentation with 6 words of text for the same price? Guess what they are going to say? Google has no false promises to backtrack on, plus they seem to have the server technology to make this all work quickly and seemlessly. There is an unstated infrastructure issue in these quarterly reports from the likes of Yahoo.

    How long did it take Yahoo to get me a nice AJAXified web mail id? Three years by my counting. They have a lot more problems than are shown in their quarterly reports I suspect. Saying ad revenue is down has a nicer ring to it than “we’re clueless as to what to try next, and our existing system is too complex to easily change”, but I suspect that latter version comes closer to the truth.

  8. To #30:

    They are already less effective. I used to use Yahoo as my start page, even after Google became more popular for search. I liked being able to set my color scheme, 3 columns, news, weather and feeds just a certain way and Yahoo provided all of that. But they also got slower and slower as the ads contained fancier graphics, got physically bigger and started using Flash animations, Javascript, etc. These ads typically come from servers different than those providing the actual news content and at times those ad servers were slow, or down completely. I’d see a blank page and a status message saying something like “Waiting for adserv2.yahoo.com”. That’s about the time ad blocking software got really popular and I suspect some of the thinking at Yahoo was along the lines of “if you aren’t going to view our ads we won’t show you the rest of it either”. Some ad blocking software can get around this, and a combination of pop-up blocking in firefox plus a “hosts” file with the most popular few hundred ad servers pointing to a fake IP adddress makes Yahoo and a lot of other pages load right snappily, with the spaces reserved for the ad (unfortunately these days about half the page) either blank or some error message. But at least you get to see the content that brought you to the page in the first place. Can Yahoo measure the number of people (like me) who view their content but are totally unaware of the ads? Do they want to share that information with their advertising customers (or have those customers figured it out on their own)? I wonder.

    When Google came out with their personalized home page I switched quickly. There ARE NO ads on that page. Nothing to block, nothing to slow things down. There are of course targeted ads in Gmail, and on search results page. If Google knows what you are searching for, or know the subject of an e-mail message they will match ads to it, and on many occasions I’ve clicked thought to the advertisers site because of that fact. That HAS to be worth a lot more to an advertiser than anything Yahoo is providing. More importantly though, graphics or no graphics, the ad and the content are QUICKLY combined onto a single page coming from a single server. I’m not sure I could block them if I wanted to, and as long as they don’t take up too much space or slow things down, there is no reason to block them.

    I suspect part of Yahoo’s problem (and this may apply to MS too) is that they have already sold their customers on these splashy ads, and now they have to serve them up. Could they go back to those customers and say, hey, how about we replace your nice Flash presentation with 6 words of text for the same price? Guess what they are going to say? Google has no false promises to backtrack on, plus they seem to have the server technology to make this all work quickly and seemlessly. There is an unstated infrastructure issue in these quarterly reports from the likes of Yahoo.

    How long did it take Yahoo to get me a nice AJAXified web mail id? Three years by my counting. They have a lot more problems than are shown in their quarterly reports I suspect. Saying ad revenue is down has a nicer ring to it than “we’re clueless as to what to try next, and our existing system is too complex to easily change”, but I suspect that latter version comes closer to the truth.

  9. Robert,

    First, banner ads do bring buyers. I can tell you this as a person who worked for the last seven years in ad systems department of a large ISP. I cannot give you exact numbers, but I’ve seen them, and they prove that you’re wrong on this one. I am not sure how well they perform in relation to Google ads, and I am not ready to analyze the cost effectiveness of those two types of ads – though I strongly believe that under different circumstances (for different types of products, on different pages etc.) different ad types will perform better.

    Another important thing is that bringing buyers (directly) is not the only purpose of banners. Banners can, for example, increase brand awareness much better than text ads.

    In general, I think that each ad type has its own benefits, and I strongly doubt that banners will becone ineffective in any near future.

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