Pay-Per-Click Advertising Trends Shaping 1999
Why advertisers are quietly shifting budget away from banners and toward keyword bidding this year, and what's driving the change.
Search advertising is still a small corner of the online ad world in 1999, but the shape of it is changing fast enough that it’s worth tracking closely. Here’s what’s moving.
Banner performance keeps sliding
Click-through rates on standard banner ads have been dropping steadily since the format’s early days, when rates over 2% were common. Most advertisers we talk to are now seeing well under 1%, and the decline shows no sign of leveling off as web users grow more accustomed to tuning banners out entirely. That erosion is the single biggest reason advertisers are willing to try something new.
GoTo.com proves the pay-for-placement model works
GoTo.com launched its keyword auction in February 1998: advertisers bid on search terms, the top bidder gets top placement and payment happens only on a click. A year later, the company has gone public and is signing syndication deals to place its paid listings on other search and portal sites, which means a single winning bid can now show up in more places than just GoTo.com’s own homepage. It’s the clearest proof yet that businesses will pay real money for intent-based placement rather than raw impressions.
Advertisers are asking for accountability
The bigger shift is attitude, not technology. Marketers who spent 1997 and 1998 buying banner inventory on faith are now asking harder questions: what did that spend produce? Pay-per-click campaigns answer that question by design, because every dollar spent is tied to a specific click on a specific term. That kind of accountability was optional with CPM banners. With keyword bidding, it’s built in.
Small advertisers are getting a way in
Display advertising on the biggest portals has always favored large budgets, since minimum buys and negotiated rates put real inventory out of reach for small businesses. Keyword bidding starting at a penny a click changes that math entirely. A local business or a small mail-order company can now compete for placement against categories that used to require an ad agency and a five-figure budget.
Where this leaves banner advertising
None of this means banners are finished. Brand advertisers with awareness goals, not direct response, still have good reasons to buy reach on high-traffic sites, and the biggest advertisers on the web are still spending the majority of their budgets there. What’s changing is the mix: performance-minded advertisers, the ones who need a click to turn into a sale, are increasingly testing pay-per-click alongside or instead of banners, and early results are giving them reasons to shift more budget that direction as the year goes on.
The businesses paying closest attention right now are the small and mid-sized ones that never had a realistic way into display advertising’s biggest inventory. For them, this isn’t a trend to watch from the sidelines, it’s the first real opening they’ve had.
More on Paid Advertising, or browse everything from 1999.
