Why such low click-through rates?
September 4, 2018 •Jordan Ehrlich
According to a 2018 SmartInsights report,
the average click-through rate across all ad formats and display ads online is just 0.05%. And according to MediaPost, 60% of mobile ad clicks are accidental. This is terrible performance! Yet it is currently accepted as the norm across the ad industry. So in this blog, I’d like to unpack why ads currently perform so poorly - and how we can improve.
Cookie based audience data is flat-out wrong
In 2017, Deloitte conducted a study where they showed consumers the audience data that cookies had gathered on them. They then asked these individuals to evaluate the accuracy of that information.
71% of respondents noted at least half of that information was completely inaccurate. This is disappointing from an advertiser’s perspective, because we’d like to believe that we’re efficiently targeting our audiences. But it’s plainly laughable from a consumer’s perspective (and slightly reassuring to know that companies don’t have as close an eye on us as we previously thought).
You can check this out for yourself actually. If you search google for the cookie data that companies have on you, you can see the audience information marketers believe to be true - and how wrong it can be.
I checked mine, and here’s what I found. As you view this, know that I am a 22 year old man with no kids.
A few hilarious points
This data suggests that I belong to Generation X (age group 39-53), while also being 80+ years old. It also assumes that I have children ages 6-10. This is just comical, and saddening as an advertiser to know I can’t rely on the data presented to me as a way to efficiently allocate my advertising budget.
So that's one reason why CTRs are so bad...
Advertisers fail to consider the relevance of their ads
Audience data is the main tool advertisers use to target their ads today. And using this information, they blindly follow individuals all over the internet. Think about all the times you get spammed with ads on websites totally unrelated to the company targeting you.
These ads miss the mark because they fail to consider the relevance of their ad to the consumer in that moment. If a target audience isn't interested in that topic at the time, they're unlikely to click on the ad being displayed, because their current intentions do not align with the ad's value proposition.
Marketers are starting to realize this. And it's probably why 87% of marketers plan to increase their contextual targeting in the next 12 months, according to a 2018 Sizmek Study.
Contextual targeting still has room for improvement
Even if you want to move away from audience based targeting and over to contextual ad placement (a form of targeting based on the contents of a website), the current technology used to inform these decisions is also rudimentary.
The current practice of tech companies aiding in this type of targeting is basically website keyword checking. For instance, if a website has the word diabetes on it, your diabetes medication ad could be placed there even if the article being read is about a man from Nebraska’s great bunt cakes - and the article just happens to mention his recent diabetes diagnosis once.
Here’s a real example of contextual ad targeting gone horribly wrong.
This Mashable article tells of an ad for PutYourFeetUp.com that was placed with an article about a man’s foot being severed on the Canadian coast. I searched for PutYourFeetUp.com and I’m not sure if it exists anymore, so I couldn’t figure out what they might have been advertising for. But I can’t imagine it was relevant to someone reading a news piece about feet being chopped off.
Now, the above article is from 2008. And contextual targeting technology has come a long way since then, but it’s largely based on the same type of keyword information on a single page.
Scaling targeted and relevant digital advertising is difficult
This explains marketers’ difficulty to reach the right audience, at the right time, in the right place online. It’s incredibly difficult to understand the vast internet landscape and its users’ behavior to know where to relevantly place our ads. This is why we have such low click-through rates right now.
Let me re-emphasize that only 5 out of ten thousand people click on display ads on the internet, and oftentimes accidentally.
My point is, if digital marketers are using these types of ad targeting strategies alone (or even combined), we are still missing our targets, and we still have room for improvement.
Right now, advertisers want to believe in contextual ad placement as a hero to save our missed audience targeting. That’s why there are more companies popping up right now exclaiming their great contextual ad placement.
It makes sense too. If we could understand the context of our ads at scale, we’d have better ad performance. Delivering relevant ads to consumers would vastly increase CTRs and Conversion Rates. That’s why there is an increasing push for relevant ad placement.
Website traffic analysis is the better answer
But the answer is not in the technology aiding contextual advertising as it works today. As I mentioned, this technology is still based on sifting through words on a single page. This approach fails to consider where the website lives in the context of its internet traffic, how traffic moves from this website to other similar ones, and the power this website has to drive traffic toward your site.
Further, contextual ads can’t be efficiently scaled with teams of people manually sifting through websites’ contents to understand context either.
However, we at DemandJump have found the answer to be analyzing website traffic patterns to identify ad relevance - focusing on how traffic flows through the internet to understand people’s intentions when they visit websites.
I’ll explain. If someone searches for Ultra HD TVs and they then read an article about different TV specs, we know that they’re interested in TV ads at the time.
They’re in shopping mode.
If someone comes from a blog discussing where to fish over the weekend, we know they could be interested in an ad for fishing vacations.
Ad placement based solely on the fact a website mentions fishing, or the fact that this individual’s cookie data suggests they are a middle aged man with a house in Florida is not effective enough.
That man with a house in Florida could currently be living in Las Vegas and only be interested in the wild weekend ahead of him. So an ad delivered to this guy right now is simply unlikely to perform well.
He’s not in fishing mode, and he may not be for a while.
Advertisers need help to identify the websites where people are actually interested in our products - the websites that are relevant to our ads. That's how we'll finally increase those CTRs.
Continue reading about this topic here.
For more information on the current display ad landscape, check out this on-demand webinar hosted by Shawn Schwegman. Here, he further elaborates on how to double your display performance with new technology.
What I mentioned earlier about looking at website traffic data is exactly DemandJump’s specialty. Our platform makes sense of all this internet behavior. And it’s how we triple return on ad spend for every one of our customers.
If this precise form of ad targeting is of interest to you, if you’re interested in good data and impactful advertising recommendations, reach out to DemandJump. We will cure the plague of poor ad performance for you.
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