AOL’s decision to axe pop-up adverts highlights the problems in the online advertising market: the irritation that pop-ups cause to customers can often be greater than the revenues they bring in. The trick going forward is to capture the attention of the consumers without irritating them; if companies can manage this, the online advertising market should pick up.
AOL has said it will eliminate pop-up adverts altogether.
Online giant AOL has decided to abolish all paid-for pop-up ads, in an attempt to boost customer satisfaction levels. The company believes that the $30 million the move will cost will be far less than the revenue that would otherwise be lost from customer desertions.
The economic downturn in the US and the rest of the world has had a detrimental effect on the broad advertising market. Consumer demand has remained comparatively weak, and the spending levels that have been keeping the US economy afloat are beginning to diminish. Consequently, profit margins have been trimmed, leading companies to slash costs.
Marketing and advertising budgets are typically easy targets to achieve rapid reductions in capital expenditure, and figures indicate that every major industrial sector curtailed expenditure on advertising in 2002. This has been most pronounced in the online advertising sector, which recorded an 11.6% reduction in revenues. This compares to an 8.3% reduction in revenues generated by TV advertising, 6.9% in magazines, 9.1% in newspapers and 7.4% in radio.
The wave of decisions like AOL’s compounds the problem even further. Other online services such as iVillage and Amazon.com have also been avoiding online advertisements, as the Internet boom slips into past memory. These online services have discarded most pop-up ads because their users absolutely hate them.
ISPs and content providers are trying to replace revenues realized from current online advertisements with more substantive and contextual ads – insertions that will not offend or frustrate their present online population. Currently, Internet advertising is used mostly as a supplement to traditional media campaigns. However, as technology advances and ad agencies become more adept at reaching target audiences, the attraction of online advertising may ultimately increase and drive growth.
Related research: Datamonitor, AOL Time Warner (BFTC0732)
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