What is banner advertising?
Banner advertising (also called display advertising) uses rectangular image- or media-based ads placed on web pages or apps to promote a brand, product, or offer and to drive visitors from the host site to the advertiser’s landing page. Typical placements include horizontal “leaderboard” banners across the top or bottom of a page and tall “skyscraper” banners in sidebars. Banner ads can be static images, animated GIFs, or richer media.
Key concepts and definitions
– Impression: one view of an ad by a visitor.
– Cost per mille (CPM): price paid per 1,000 impressions (mille = thousand).
– Cost per click (CPC): price paid each time a visitor clicks the ad and goes to the advertiser’s site.
– Cost per action (CPA): price paid when a visitor completes a specified action after clicking (signup, purchase, form fill).
– Ad network / central ad server: technology and services that match advertisers to publishers and deliver the correct ad to a given visitor.
– Programmatic bidding (real-time bidding): automated auctions run in milliseconds while a page loads, letting advertisers bid on individual ad impressions based on targeting.
How banner advertising works (step-by-step)
1. Advertiser defines goals: brand awareness, clicks, or conversions.
2. Choose creative and format: sizes, static vs animated, or rich media.
3. Select targeting: contextual (site/topic), behavioral (user browsing history), demographic, or retargeting (past visitors).
4. Choose a buying model: CPM, CPC, or CPA.
5. Buy inventory via direct deals, ad networks, or programmatic platforms (DSPs—demand-side platforms).
6. Ad server selects and serves the ad to matching visitors.
7. Measure outcomes (impressions, clicks, conversions) and optimize creative, targeting, and bids.
Fast historical note
The earliest commercial banner ads appeared in the mid-1990s on what became one of the Web’s first content portals; those early banners invited clicks and pointed users to advertiser campaigns.
Technology and targeting
Ad networks and central ad servers keep catalogs of available inventory and serve ads based on site context or visitor signals (keywords, previous searches, browsing behavior). Programmatic systems run auctions in real time so advertisers can bid for impressions tailored to specific users or contexts. Personalization and targeted messages are increasingly common in display campaigns.
Common performance goals
– Brand awareness: maximize impressions; CPM is often used.
– Traffic / engagement: maximize clicks; CPC is common.
– Direct response: maximize specific actions; CPA or performance-based pricing is preferred.
Checklist: launching a banner ad campaign
– Define the objective (awareness, traffic, conversions).
– Select target audience and channels (sites, apps, social platforms).
– Pick ad sizes and formats (leaderboard, skyscraper, mobile sizes).
– Decide buying model (CPM / CPC / CPA) and budget.
– Build creative with a clear call to action and optimized landing page.
– Implement tracking (impression tags, click tracking, conversion pixels).
– Run a pilot or A/B test variations.
– Monitor KPIs (impressions, CTR, CPC, conversion rate, CPA) and iterate.
Worked numeric example (comparing CPM, effective CPC, and CPA)
Assumptions:
– You buy display inventory at $5 CPM (cost per 1,000 impressions).
– You receive 100,000 impressions.
– Observed click-through rate (CTR) = 0.2% (0.002).
– Conversion rate after click = 5% (0.05).
Calculations:
1. Total cost = (100,000 impressions / 1,000) × $5 = 100 × $5 = $500.
2. Clicks = 100,000 × 0.002 = 200 clicks.
3. Effective CPC = $500 /
200 clicks = $500 / 200 = $2.50 per click.
4. Conversions = 200 clicks × 0.05 = 10 conversions.
5. Cost per acquisition (CPA) = $500 / 10 = $50 per conversion.
Interpretation and simple comparisons
– Formula summary
– CPM (cost per mille, i.e., per 1,000 impressions) = price quoted for impressions.
– CTR (click-through rate) = clicks / impressions.
– Effective CPC (cost per click) = CPM / (1,000 × CTR).
– CPA (cost per acquisition) = Effective CPC / conversion rate = CPM / (1,000 × CTR × conversion rate).
– In this example:
– CPM = $5, CTR = 0.2% (0.002), conversion rate = 5% (0.05).
– Effective CPC = $2.50. CPA = $50.
– If you instead bought on CPC at $1.00 per click, the same 200 clicks would cost $200 and CPA = $200 / 10 = $20 — showing how pricing model and performance metrics interact.
How to improve outcomes (practical levers)
– Increase CTR (raise clicks per impression)
– Improve creative relevance and call-to-action (CTA).
– Use better targeting (contextual or audience segments).
– Test ad sizes and placements with higher viewability.
– Lower CPM (pay less per 1,000 impressions)
– Negotiate, shift to lower-cost inventory, use private marketplaces, or run off-peak.
– Raise conversion rate (more conversions per click)
– Optimize landing page speed and messaging; remove friction in checkout or sign-up.
– Use clearer CTA and better match between ad promise and landing content.
– Change pricing model where possible
– Move from CPM to CPC or CPA buys if you can secure performance-based deals.
Worked sensitivity examples (same baseline: 100,000 impressions, $5 CPM)
– Double CTR to 0.4% (0.004) while other rates unchanged:
– Clicks = 100,000 × 0.004 = 400; Effective CPC = $500 / 400 = $1.25; CPA = $1.25 / 0.05 = $25.
– Double conversion rate to 10% (0.10) while baseline CTR:
– Conversions = 200 × 0.10 = 20; CPA = $500 / 20 = $25.
– Both CTR and conversion rate double:
– CPA = $12.50.
Practical checklist before you buy display (step-by-step)
1. Define objective: awareness, traffic, or conversions. Choose KPI accordingly (impressions/CPM, clicks/CPC, or conversions/CPA).
2. Set target economics: acceptable CPC/CPA or target ROAS (return on ad spend). Document assumptions (CTR, conversion rate).
3. Select inventory and pricing model: direct buy, programmatic, CPM/CPC/CPA, or PMP (private marketplace).
4. Build creatives to spec (size, format, file size) and ensure message matches landing page.
5. Implement tracking: impression tags, click tracking, and conversion pixels. Validate with test events.
6. Pilot / A/B test: run small test with at least two creative/targeting variants for sufficient statistical power.
7. Monitor KPIs daily/weekly: impressions, viewable impressions, CTR, CPC, conversion rate, CPA, and fraud indicators.
8. Iterate: reallocate to better-performing placements, pause poor creatives, and adjust bids.