How effective are our banner ad campaigns? How do the stats compare to other forms of advertising? And which stats are the important ones to look at in the first place? A lot of ad buyers can't answer these questions. They buy (or don't buy) banner ads because they "know they need to", or on the recommendation of someone they met on a plane. A lot of them aren't even clear on what the real objectives of their online campaigns are.

Well, there's no excuse for this. Online advertising is in fact an easy thing to measure and quantify. The Internet can provide a level of detail that no other medium can ever hope to. The online advertising business is a more mature one than many people realize, and the tools to measure the effectiveness of banner ad campaigns are there for those who know how to use them.

Assessing ad effectiveness is not only of interest to ad buyers. Site owners who sell ads need to know the drill, so that they'll know what they have to sell, what it's worth, and how it stacks up to the competition. Web developers should have a basic understanding of the subject too - among other reasons, it's handy to be able to judge whether clients' projections of ad revenues are realistic.

This article concerns full-scale advertising campaigns placed by commercial ad agencies - the big leagues, in other words, which are basically open to sites with a half-million or more page impressions per month. Not that online ads are strictly for the big boys - there's plenty of action (though precious little cash) in the minor and bush leagues, too. See my earlier article Sell Ads on my Site? to find out how owners of smaller sites, or advertisers with wee budgets, can get into the game.

But for now we're talking about full-scale online ad campaigns, not cost-per-click, barter or affiliate programs. Banner ads, as far as we're concerned, are sold by the page impression - each time a user views one Web page is counted as one impression. Prices are quoted in "CPM", a holdover from print ad days which means "cost per thousand". For example, if the CPM for a particular campaign is $20, then it would cost $2,000 for 100,000 impressions.

Banner ads yield two benefits. First, they may entice users to click on the banner and go to the advertiser's site. Each time this happens is called a "clickthrough", and the number of clickthroughs divided by the number of impressions is called the "clickthrough ratio" or "click rate". This is easy to measure, and provides a direct measurement of a banner's effectiveness.

The second benefit of ad banners is building brand recognition. Despite ad agency claims to the contrary, this is almost impossible to measure. User surveys and market research can provide clues, but they are very imprecise and conjectural compared to the straightforward business of measuring clickthroughs and site traffic. Whether brand recognition is part of your strategy depends entirely upon your individual situation. If it is, then things like click ratios and conversion rates can't be used as absolute criteria, and the process of measuring effectiveness becomes much more subjective.