Web users are failing to rally to banner adverts

It's official: Irish Web users are bigger suckers than anyone anywhere else. Oh, all right, let me rephrase that more politely. According to findings released last week by Nielsen/Net Ratings, Irish people click on banner advertisements more frequently than people in any other country in the world. Unsurprisingly, the advertising people are thrilled. "Irish Internet users have shown themselves to be up there with the largest and most active Internet markets in terms of their awareness of and interaction with online advertising," said Mr Steve Shanahan, the chief executive of the Institute of Advertising Practitioners of Ireland, in a statement included on the Nielsen press release. "A currency for advertising on the Internet is being created." If so, it's a currency with all the vigour and strength of the euro.

Let's put these findings in perspective. While the advertisers would like you to think that Irish Web users are a click-happy lot who can hardly wait to see what exciting offer awaits them behind the blinking facade of an online banner advertisement, the number is actually so infinitesimally small that, in any other medium, they'd be weeping with frustration.

Only 0.62 per cent - yes, barely more than half of 1 per cent - of Irish Web users click on banner advertisements. The "largest and most active" Internet markets are even more woeful. In the US, only 0.51 per cent of users want to know what lies on the far side of a banner advertisement; in Britain, it's 0.48 per cent; in Australia, 0.37 per cent; and in Canada, 0.26 per cent. The reality is that banner advertisements are not a particularly successful advertising format and never have been. The advertising industry has been pulling its collective, expensively-styled hair out over that fact since Wired spin-off Hotwired.com invented the banner advertisement concept five years ago. While the industry likes to go about telling you how advertising "spend" has increased a gazillion-fold "year on year", this has to be given some context. First, it is widely recognised that advertising spend figures were massaged for ages. The average Joe would assume that "spend" means the total value of advertising spaces sold to advertisers.

But in truth, much of the Net's initial advertising "income" included benefit-in-kind deals, where Web company A would run the advertisements of Web company B in exchange for company B running the advertisements of company A. The "value" might have been X number of dollars and pounds if the advertising space had been sold, but it hadn't; it was merely traded for other advertisements. In the first years of the Web, the value placed on online billboard space (in the format of the weeny banner advertisement) kept plummeting. That meant Web companies that thought they could make money through advertising - much less simply recoup their operational costs - had another think coming. Now look what has happened. So-called B2C, or business to consumer, websites have been hammered, as investors have realised that dot.coms just aren't going to make money through advertising alone.

Nor, it seems, can most manage to break even through a combination of advertising and online retailing. This has been a harsh kick in the behind for online media companies in particular. These companies had thought they could duplicate a print model on the Internet: offer content, sell advertising space, make a profit. Soon, they had to try to sell stuff, too.

The pioneers in this area - Hotwired.com, originally owned by Wired magazine, and San Francisco's incisive Salon.com, whose share price has dropped so low it may be kicked off the Nasdaq - still aren't making money off a model they thought would be profitable "within six months" when I talked to them years ago. But advertising dollars are still growing, chirps the advertising industry. For example, according to new figures from analyst Jupiter Communications, advertising spending will jump from $3.5 billion in 1999 to $16.5 billion by 2005.

Well, of course spending will rise. Everyone knows the Web is increasingly the medium of today, not just tomorrow; most Web users still fall into the prime consumer profile that earns and spends reasonably well, and hey - advertising space is pretty cheap compared to, say, a full-page advertisement in today's Irish Times. And of course, it's hard for users not to notice the advertisements, even if they don't click on them. Nonetheless, the situation is not as the industry would like, and the problem for Web advertisers is threefold. First of all, Web users are the same people who downloaded 20 million copies of Napster's software, which lets people exchange music for free over the Net. They are the folks who forced Microsoft's witty online 'zine Slate to go back to being free, after a hopeless attempt to make people pay for a subscription.

Users don't want to pay for stuff and don't want to be marketing subjects. They hate unsolicited e-mail advertising (spam) and they do not click on banner advertisements. They do not like any other form of advertising either, such as the horrific "interstitials", those little windows that pop up and try to sell you something while you're looking at a Web page. Most of the time you probably click the window shut well before you have any idea of what is being sold, which points to the second problem for advertisers. Most of the world still has a slow Net connection. Print, television and radio advertisements are effective because they're right here, right now, visible exactly when one is truly "interacting" with the medium. Banner advertisements and interstitials, on the other hand, usually take a while to download. So, we notoriously promiscuous Web users click away to somewhere that doesn't make us wait.

And finally, Web users are getting smarter and smarter about what those banner ads can do in terms of harvesting personal information without their knowledge. People routinely say in surveys that they do not trust advertisements online and fear their privacy is being compromised. The industry itself has done little to dispel such concerns. Look at the case of DoubleClick, the company that places online advertisements for advertisers, which drew the ire of the US Federal Trade Commission for its secretive data-gathering practices. The commission may have decided in July to accept DoubleClick's proposals for self-regulation, but all the signs indicate consumers will not settle for this approach unless the industry radically overhauls its current mindset. In other words, I wouldn't be too optimistic that click-through rates are going to skyrocket anytime soon.

klillington@irish-times.ie