In theory, advertising on the web ought to be highly effective: Just to begin with, you have captive eyeballs, without the distractions of radio and TV. And you can actually track whether ads are seen and responded to.
    Trouble is, theory alone isn't worth too much.
    Now there's research that backs up this thinking.
    It comes from Avenue A, an internet marketing firm, and it concludes online ads are effective in three critical areas: raising brand awareness, driving traffic and sales, and boosting offline sales.
    Avenue A researchers reached these conclusions after following actual users in their behavior.
    The study further asserts that using click-through rates to evaluate the effectiveness of an online campaign disregards the rationale behind advertising.
     "To be honest, I think they’re focusing on the wrong metric," says Young-Bean Song, the study’s author and Avenue A’s director of analytics, referring to most of online advertising’s critics.
    "When you compare click-through rates with conversion rates, there’s absolutely no correlation. If you put an attractive woman wearing very little clothes on a banner, you’re going to get an extremely nice click-through rate. But when you look at the conversion rate you’re not going to sell a thing."
     The study, which mixes in-house research with findings from other recent reports, makes what these days comes across as a radical declaration even as it has been consistently backed by research: Online advertising is effective.
    First, Avenue A claims that online ads are good for boosting sales and traffic. 
    To back up this claim, the marketing company tracked the behavior of web surfers who were exposed to an ad for an internet travel company, and found that people who saw the ad generated 10 percent more sales and traffic than people who didn’t see the ad.
    Additionally, Avenue A asserts that online advertising can ramp up off-line sales. Citing the study released last fall by Forrester Research (see "Much-abused banner gets a respectful nod"), the Avenue A report notes that sales of an impulse food product increased by 19 percent among web users exposed to an ad for it.
    And as exposure to the ad increased, so did the product’s sales. People who saw the ad seven to 10 times were 28 percent more likely to buy the impulse food than people in the control group 
    The Avenue A report posits that online advertising builds brand awareness, referring to a study by online research company Dynamic Logic that found that internet advertising increases brand awareness by an average of six percent.
    Dynamic Logic scrutinized an internet campaign for online travel site Travelocity, and found that the campaign boosted brand awareness overall by 16 percent. People who were exposed to Travelocity ads four or more times became 44 percent more aware of the brand name.
    And a Next Century Media study, according to the Avenue A report, determined that web users who see a sponsored site are more likely to think about buying the sponsor’s product.   
    Also, the report says, internet advertising helps advertisers keep and acquire customers.
    According to Avenue A’s own research, 13 percent of users who click on ads are people who have already been to the advertiser’s site. Plus, the conversion rates were nearly 250 percent greater among people who had previously visited a web site than among first-time visitors.
    Song therefore suggests that for effective online campaigns, advertisers should recognize the differences between their customers when they craft their campaigns.
    "Right now, most people are doing the dumbest form of targeting: They’re not targeting at all," he says.
    By using existing ad-serving technology, he adds, it is possible to distinguish first-time visitors from longtime customers. And advertisers should have different goals in mind for different visitors and run multiple campaigns to get the most out of internet advertising.
    For example, a content site can target ads to entice people who have never been to a web site to read its free content. Those readers, in turn, could see ads attempting to persuade them to sign up for a free trial of the site’s subscription-based content.
    "That’s the kind of intelligence and targeting that you can’t get with any other vehicle," Song says. "The true power of the internet is when you start actually differentiating between people who have actually been to your web site and haven’t been to your web site."
    Advertisers would also do well to stop focusing on click-throughs, which are declining given the sheer volume of impressions that are being served.
    This is not to say that click-throughs are inherently worthless, however.
    Song notes that click-throughs, web site visits, registrations, email address captures and actual sales and conversions are the main goals of online advertising.
    "All of those are just different interactions that you’re going to have with your users, and a click-through rate is probably the most benign of all five of those--and probably the least impact-ful for most e-commerce clients," Song says.
    The positive effects of online advertising have been generally lost in recent months amid a flurry of bad economic news for dot.coms and a continuing glut of inventory on the web.
   "A lot of the press that’s disparaging online internet advertising has really not been directed in the right way," Song says. "You see people spending more time online and you’ve got to believe that the dollars will follow."

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