[ONLINE ADVERTISING] 1 Online Advertising: Identifying different types of web advertising and its impact on consumer buying behavior Matthew Duncan Elon University COM 530 Theory & Audience Analysis Professor Lackoff November 18, 2011
2 [ONLINE ADVERTISING] Abstract The purpose of this research paper is to analyze different types of online advertising and explore how online advertisements affects consumers purchasing behavior. This research summarizes the definition of advertising while explaining how online advertising has grown and accessing which method is the most effective. The paper explores new grounds as it examines of users perception towards online advertisements and if this perception affects the brand of the website that hosts the ad. The theoretical frameworks used in this paper are the instant gratification theory along and the means end theory. The method used to obtain the data is through a survey. This research paper analyzes the different types of online advertising. Along with that, I examine which online advertising is the most effective. The research that I conducted in this paper was seeing if online advertisements effect users perception towards the website that hosts the ad.
[ONLINE ADVERTISING] 3 Introduction Since the explosion of Internet, web companies have invested an abundant of money into online advertising. Other forms of advertising such as in- store ads, print ads, and television and radio ads are still important but online advertising is growing significantly. Even with this explosion of online advertising, there are many different forms of advertising that is used on the Internet. Increasingly innovative types of advertising are coming into existence as the Web matures. The major types of online advertising are banner ads; text ads, interstitials, pop- ups ads, opt in mailing, HTML ads, and rich media ads. In my research paper I am going to describe in detail what the difference is between each type of advertisement and look at the when the appropriate time for each one should be used. This research will identify the types of online advertisement, and then it is going to explore the impact that online advertising has on consumers buying behavior. With billion of dollars being spent in online advertising, this research is going to explore the effectiveness of the method. First, you have to indicate where the ads are being placed, which websites and were the placement of the ads are. The research will indicate what type of buyer you have; either frequent online buyer, occasional online buyer, or non- online buyer. If they do not buy online are they
4 [ONLINE ADVERTISING] buying the product in another way. Next, the research will look at the differences between how marketers advertise products online and offline. The goal of this research paper is to examine how the users perceive these online advertisements. The methods that I will use to examine how users perceive advertisements are measuring the time users have spent on site with advertisements, examine if users come back to the website, and measure the users click through rate of websites. The research is gathered from scholarly journals and research done by educators in the industry. Theoretical Framework The theoretical framework that this research will be examined through is instant gratification theory and means end theory. Today s generation has been coined the microwave generation because they are use to getting everything so fast. With the evolution of the Internet and technology there is no little to no patience in people anymore. Researches have examined this and they have concluded a theory that explains this phenomenon. The instant gratification theory looks at the fast place environment we live in that requires immediate action and things occurring all at once and quickly. This research will explore if online advertisements have a negative or positive impact on consumers instant gratification while they are using the Internet. In additional to examining how the presentation of online ads affects consumers buying behavior this research will look at the effectiveness of online advertising through the lens of the means end theory. Researches have established a
[ONLINE ADVERTISING] 5 theoretical structure that connects consumer s values to their buying behavior. Means are products or activities in which people engage. Ends are valued states of being such as happiness, security, and accomplishment. A means end theory seeks to explain how a product or service selection facilitates the achievement of desired end states (Gutman, 1982). Therefore, by looking at these two theories this research will uncover if online advertising is effective; and if it is effect what is the most efficient advertising method on the Internet, and explore how cluttered and intrusive ads effect users perception of advertisements and Websites. Literature Review Definition of advertising The dictionary defines advertising as the act or practice of calling public attention to one s product, service, need, etc., especially by paid announcements in newspapers and magazines, over radio or television, on billboards, etc. Advertising uses many different types of appeal and a range of media to achieve a variety of goals. Different ads for the same brand can have markedly different effects and the same ad can produce different effects in different audience segments (East, 2003). Marketers and advertisers have to do research of their consumers and with that research might bread out different ads depending on variables such as age, gender, sex, and cultural difference. Tailoring your message depending on different demographics is important because every customer has a different means end when it comes to purchasing items. One consumer might buy an item for religious purposes, while another consumers might buy the same item for fashion purposes.
6 [ONLINE ADVERTISING] As an advertiser you have to know how to apply the means end theory to your demographic of consumers. You need to know why they are buying your product, either to bring them happiness, make them feel secure, or as a necessity. Advertising is an important part of a business model because it combines both creative and practical skills. East (2003) argues that advertising is the most interesting of all the business fields. Ads give your products life and they are supposed to make the product more appealing to the customers. Good advertisements can build a brand but bad advertisements can tarnish the perception of brand to consumers. Types of online advertisements The first type of online advertisements that is going to be looked it is Banner- Ads. Banner advertisements are the main form of advertising on the Web. Banner advertisements display advertisements that are usually hyperlinked to an advertisers website (Li & Bukovac, 1999). They are typically is located at the top of a Web page. Online banner ads can be either static or have animation. Most banner ads are horizontal but some websites use vertical banners but they are seen less because they take up more space and cost more. Another type of online advertising is text ads. A text ad can consist of lines of copy that are together with a link or an email address for action. Text ads are mostly popular in online newsletters and RSS feeds. Research trying to track the number of text ads that have been shown on a site has proven to be difficult because so many sites choose to hide a 1x1 pixel transparent graphic right next to the text ad and
[ONLINE ADVERTISING] 7 count how many times the graphic is loaded as being the number of times the text ad as loaded. Another method developer s use is to use JavaScript to serve the text ads, and an impression is counted each time that mechanism delivers a new ad. The most popular example of text ads is Google s AdSense program that delivers contextually relevant text ads to targeted websites based on the content of that page. In addition, to banner ads and text ads, interstitials are becoming popular with advertisers to use online. Interstitials ads are ads that are shown in the transition between two pages of a site. For example, you click on a link on Page A and instead of going to Page B you arrive at an intermediate page containing an advertisement. Sometimes these pages have links that takes you to Page B or they might have a link that says skip this ad. Many sites are starting to use interstitials because they load to another page and advertisers love them because they offer a larger space for them to pitch a product. Pop- up ads are very similar to interstitials ads. Pop- up ads are a small window that pops up over the main browser window either when you enter or exit a site. The pop- up windows can contain everything from text, graphics, and forms to collect information such as email addresses from customers. Pop- up ads take control away from the websites browser. Most pop up windows can be minimized or become hidden behind other browser windows easily, making the advertisement not visible.
8 [ONLINE ADVERTISING] Email newsletters or Opt in Mailing advertising is not the same as SPAM. This type of advertising involves sending email messages to a list of customers that have expressed an interest in receiving information on a given topic. Users have been scared to sign up for this type of service because sites would sell their list of newsletter recipients to advertisers but most sites have gone to the method of keeping their customers information a secret. This method has shown to be successful because subscription rates to email newsletters are high. If the email newsletters have significant information and ads then the customer is much more likely to keep it or pass it along to others. If you want to opt out of receiving emails, you can just simply unsubscribe. The final type of online advertising that will be discussed is target and obtrusive ads for social media websites. Social networks as Facebook collects so much data on their users they start to form an idea of what that user might be interested in. Advertisers on Facebook can target people within that site based on affinity, region, network, and stated interest. Even on Twitter, they have suggested companies to follow based on the topics you hastages in your tweets. Advertisers are now trying to make sure they are reaching their customers across different platforms and websites by tracking and analyzing the things they are interested in. So far, this research defined advertising and looked at the different types of advertisements; the next phase of the paper will examine which advertisement is the most and least effective. Effective advertisement
[ONLINE ADVERTISING] 9 With the success of the Internet, people in today s society are now experiencing information overload when it comes to advertisements. The growth of is sparked by increases in online population, time spent online and the increasing amount of people adopting Internet commerce. Leuning states that since 2005, the average surfer is exposed to 950 on- line marketing messages a day (Olsen, 2003). Internet advertisements are everywhere. According to a recent Jupiter Communications report, on- line ad spending is expected to reach $14 billion by 2007, making the Internet the fourth largest advertising communication medium (Olsen, 2003). Nevertheless, with this huge web community marketers have an increasing challenge to connect to their consumers through the online clutter. So how do advertisers choose the best way to connect to their customers? What is an effective way to connect to their customers? Educators in the industry of marketing have seemed to answer this question. The first step for advertisers is identifying how they are going to affect the consumers decision- making process. St. Elmo Lewis in the late 1800s created the AIDA (attention- interest- desire- action) model called the Hierarchy of Effects Models. The model examines the framework of how consumers respond to advertising messages. Capturing the attention of your audience is the first step of the model. Attention refers to the amount of mental effort or cognitive capacity allocated to a task, and the concept is considered to have both direction and intensity (Yoo, Kim, & Stout, 2000). After you capture the attention of the customer memory is the next critical role that advertisers aim for. With the high amount of information on the Internet, advertisers have to do something that will increase
10 [ONLINE ADVERTISING] stimulus in memory. Li and Bukovac noted that stimulating visual image on a calm background, or an animated object on a still background would be considered distinctive, and such distinctive images are theoretically presumed to develop unique memory traces making them easier to locate in memory (Yoo et al., 2000). After advertisers have made an online advertisement that has grabbed the users attention and stimulated their memory, the next step is to get involved with the ad. Individuals with higher product involvement pay more attention to advertising stimuli and spend more time processing advertisements than those with lower product involvement. Researchers have found that the higher involvement increases memory for an advertising message, because higher involvement increases the accessibility of message details, which leads t better recall (Yoo et all. 2000). Advertisers have studied the components of an ad; attention, memory, and involvement are important to capture when marketing to customers. However, these components are hard to study and gather information on. Advertisers have been pushing for heuristic metrics of performance such as click- through, which indicates when a web surfer clicks through to the advertisers URL via the banner (Manchanda, Dube, Goh, & Chintagunta, 2006). The banner advertisements take the customer to the advertiser s destination. The click through means the customer has interacted with the advertisement. With other online advertisements you have no way of evaluating if they are effective or not. Banner advertisements are the best at having measurable outcomes for both the website and advertisers. Of course, there are both pros and cost associated with this advertisement method. Pros include revenue generated from banner placement, synergistic effects of banner ads with
[ONLINE ADVERTISING] 11 Website, cooperative relationship with banner brand, informative links, etc. Certainly, cons also exist such as Website clutter, negative effects on brand image from unfavorable association with the banner brand, incongruity with the Website, a loss of space on Website etc. However, animated banner ads are the most effective, not static banner ads. Reeves and Nass stated that when objects or people in pictures move, attention would be higher than during segments with no motion (Yoo et al., 2000). Banner advertisements are able to affect attention, memory, and involvement, while recording usability of these entire features through click- through rates making it the most effective way to advertise online. Effects of online advertising on customers Online advertising techniques such as banners, pop- ups, and pop- unders are quite annoying to Internet users (McCoy, Everard, Polak, & Galletta, 2007). This is surprising because traditional media like television commercials has been long been criticized as being intrusive and the leader in advertising annoyance. Rust and Varki predicated that advertisements in new media would be less intrusive than in traditional media (McCoy et at., 2007). However, researched indicated that online consumers are more goals oriented and judge online advertisements even more harshly than those in other media. The negative perception that users develop towards intrusive ads leads them to not return to that website. A Jupiter Research survey showed that 69% of users consider pop- ups annoying, and, further, 23% said they would not return to the site simple because of the ads (McCoy et at., 2007). With users needing instant gratification not being able to complete their goals while
12 [ONLINE ADVERTISING] online is starting to diminish their feelings towards advertisements, company s brands and website environments. Abernethy describes intrusive online ads to being a television viewer who cannot leave the room or change the channel during a commercial, the user are deterred and feel helpless because there is little they can do to escape these ads other than interrupt their task, scroll past ads, or close the pop- up/pop- under windows (McCoy et at., 2007). Research Previous research about online advertising has only examined the effectiveness of online advertising or explored one specific how online advertising affects consumers. However, there has been minute data gathered on how online advertising effects consumers and the websites that host these advertisements. Does an attitude towards an advertisement extend towards the web site? Ajzen and Fishbein state that consumers attitudes toward brands are instrumental in determining their purchase intentions and actual purchase of a brand (Newman, Stern, & Sprott (2004). Evaluating a brand attitude gives you insight on the feelings and evaluations consumers have about a certain brand. Indeed, researchers studying attitudes toward the ad have found that consumers attitudes toward advertisements predict consumer brand preferences and purchase behavior (Newman et at., 2004). Below is data collected from a survey that research collected. The entire experiment took place online with the survey being posted to social media platforms such as Facebook, Twitter, and LinkedIn. One arriving at the URL posted
[ONLINE ADVERTISING] 13 on these social networks, participants encountered the main questionnaire that contained ten questions about online advertising. The purpose of the survey was to conduct research on how individuals feel about online advertising and the websites that host them. Listed below are the ten questions from the survey, the total number of participants per question, and their response broken down in response by whole number and response by percentage. Results & Conclusion Internet advertising has been described as nonsensical, uninformative, forgettable, ineffective, and intrusive (McCoy et at., 2007). From the data that was collected, this statement can be seen as true. From the 92 participants in this survey 46.7% do not like online advertising. When analyzing how often do they see online advertisements 83.7% of users stated that they see online ads often. Most users, 57.6%, perceive that online advertisements as informative. Approximately 55.4% of users stated that they feel annoyed by online advertising. When asked to identity what is your favorite and least favorite type of online advertisement out of the choices of banner ads, email ads, pop- ups, and interstitials, 40.2% of participants said they preferred banner ads but 38.0% of users said they do prefer online advertisements. An overwhelming majority of the participants named their least favorite online advertisement as pop- up ads. Participants of the survey, almost 65.2% of them, identified that online advertisements do affect the perception of the websites brand. Results were split when participants had to identify if they trusted online advertising or not, 45.7% stated no and 45.7% stated that maybe trust online
14 [ONLINE ADVERTISING] advertisement. When asked how comfortable are you about purchasing directly through an address or number listed in an advertisement, 46.7% of participants stated not comfortable at all while 35.9% stated not very comfortable. The most variation in response came when ask do you use advertisements to help make your purchase decisions, 30.4% said sometimes, 29.3% said never, and 37.0% said seldom. This research paper sheds light on a growing issue that is associated with a very large industry. Designers, marketers, and advertisers need to fully understand the effects caused by their advertisements. Their advertisements do not affect the brand that they are trying to represent but it affects the websites these ads are hosted on. So where are advertisers going wrong? It seems that they are more concerned about getting there message out there then if there message is effective or not. In this growing industry of online advertising, advertisers are just to make their ads bigger, brighter, and flashier then their competitors so that the consumer can see them. They are taking the approach of any means necessary. In doing this, they are not considering the customers who buy these products. Majority of users rank pop up ads, interstitials, and email ads as ineffective but you still majority of these ads see used. This is because these advertisements are most cost efficient. This research and the research done by others in the field will quickly end ineffective advertising. To have an effective advertisements you have to give your audience choose. They have to be able to choose to either watch that video or click on that banner ad. The moment you take away that choice and make your advertisement intrusive your lose that customer from that brand and possible from that website.
[ONLINE ADVERTISING] 15 This research should be a launching pad for others. Future research can dig deeper into the specifics of why users do not like online advertisements, why they like certain advertisements and why do not enjoy certain advertisements.