Shock! Horror! Online display actually works. . .

You can take the boy out of Wall Street, but you can’t take Wall Street out of the boy.

Hence the sight of disgraced financial analyst Henry Blodget, founder of Silicon Alley Insider, doing what comes naturally.

Blodget spent much of last year talking down online ad markets. Credit to him: he was ahead of the curve. Now, however, after scoring $5m in VC funding for his site, Blodget seems more intent upon talking up the medium.

In a recent post, Blodget underlines what’s always been wrong with online display — the focus on the last click that brings a surfer to the destination desired by an advertiser. In the 1990s, publishers taught advertisers to focus on that last click. The subsequent rise of search advertising only reinforced the prejudice.

Blodget  argues — quite rightly — that online display advertising is capable of performing a wide range of more valuable tricks.

[P]lacing ads in front of people is effective even when they don’t click them, which is why (until recently), [advertisers have] shoveled $50-odd billion into newspaper and magazine ads every year, $50 billion into TV ads, and another $10 billion or so into radio and billboard ads. The myth of the online display-ad click, however, has held fast, and advertisers have thus not really taken advantage of the messaging and branding benefits of them.

This much is true. What I’m less sure about is Blodget’s next claim, which goes like this:

But that is finally changing!

Oh really? With CPMs heading downwards and excess inventory sloshing around the industry like so much blood on a slaughterhouse floor?

As it turns out, Blodget has three reasons for suggesting that the tide is moving in favour of online display:

  • people aren’t reading newspapers or listening to radio much anymore.
  • advertisers and ad agencies are learning more about what display ads can do.
  • new research is showing that display ads are, in fact, effective even when people don’t click on them.

Because there’s no proof that the first two factors are doing anything positive for online display markets, Blodget’s thesis relies on the third — research. In particular, he wheels out a piece of number-crunching produced by Comscore on behalf of the Online Publishers Association.

The research is a coherent piece of work. It says a number of highly positive things about online display, most of which I happen to find credible.

My problem lies elsewhere — with Blodget’s belief that attitudes to online display are actually changing.

The sad fact is that Comscore (to its credit) has been turning out research like this for a number of years. (My favourite example is here. It was delivered at a conference in Wharton in 2008.)

Despite this, the change which Blodget champions is still an aspiration — a thing of the future.

The vast majority of advertisers experience serious difficulties measuring the branding effects of online display campaigns.

Many don’t bother, at least not with the kind of sophistication evinced by Comscore. Before advertisers routinely perform this kind of analysis, we’ll need to see a revolution in terms of tools, metrics and willingness.

Publishers will need to play a role in this revolution, too. Many publishers who now carp about the meagre returns delivered by online display have failed to invest adequately in proving the medium’s ability to deliver. This, too, needs to change.

On the sidelines sit Google, Yahoo and Microsoft. Their rhetoric suggests dedication to resolving the medium’s myriad bottlenecks. But take Google specifically: after a year’s worth of suggestions that the company’s “magic” — in Eric Schmidt’s words — will be sprinkled over online display markets, we’ve yet to see anything concrete.

And so we wait. Online display has a future. It’s critical for the future of journalism that we identify that future — and start exploiting it as soon as possible.

Henry’s Blodget’s suggestion that things are “finally changing” is endearingly optimistic. But it doesn’t reflect reality. Yet.

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