How Banner Ads Work

Banner Ad Objectives

Advertisers generally hope a banner ad will do one of two things. Ideally, a visitor to the publisher site, the Web site that posts the banner ad, will click on the banner ad and go to the advertiser's Web site. In this case the banner ad has brought the advertiser a visitor they would not have had otherwise. The banner ad is a real success if the visitor not only comes to the site but also buys something. Failing a click-through, advertisers hope that a publisher site visitor will see the banner ad and will somehow register it in their heads. This could mean the visitor consciously notes the content of a banner ad and decides to visit the advertiser's site at some time in the future, or it might mean that the visitor only peripherally picks up on the ad but is made aware of the advertiser's product or service.

This second effect of advertising is known as branding. We've all experienced the effects of branding before. Say you see ads on television for Brand X glue all the time. The ads don't seem to particularly affect you -- you don't leap from your couch to go buy glue -- but down the road, when you're at the store shopping for glue, they may affect the decision you make. If you don't have any other reason to choose one type of glue over the others, you'll probably choose the one you're most familiar with, Brand X, even if you're only familiar with it because of advertising.


So there are several ways a banner ad can be successful. Consequently, there are several ways advertisers measure banner ad success. Advertisers look at:

  • Clicks/Click-throughs: The number of visitors who click on the banner ad linking to the advertiser's Web site. Publisher sites often sell banner ad space on a cost-per-click (CPC) basis.
  • Page views: Also called page impressions, this is the number of times a particular Web page has been requested from the server. Advertisers are interested in page views because they indicate the number of visitors who could have seen the banner ad. Although they don't measure the effectiveness of a branding campaign, they do measure how many visitors were exposed to it. The most common way to sell banner ad space is cost per thousand impressions, or CPM (In roman numerals, M equals a thousand).
  • Click-through rate (CTR): This describes the ratio of page views to clicks. It is expressed as the percentage of total visitors to a particular page who actually clicked on the banner ad. The typical click-through-rate is something under 1 percent, and click-through rates significantly higher than that are very rare.
  • Cost per sale: This is the measure of how much advertising money is spent on making one sale. Advertisers use different means to calculate this, depending on the ad and the product or service. Many advertisers keep track of visitor activity using Internet cookies. This technology allows the site to combine shopping history with information about how the visitor originally came to the site.

Different measures are more important to different advertisers, but most advertisers consider all of these elements when judging the effectiveness of a banner ad.