Summary: Web users are highly goal-driven, and ads that interfere with their goals will be ignored. To succeed, ads must work with the medium, as well as with the user's aims and mindset.
There are many reasons why advertisements don't work well on the Web, but it is most unsettling when an ad actually portrays something relevant to users and still fails. Why would this occur? Well, to start, we must consider why text ads work so well on search engines.
Each user has a goal -- perhaps it is to learn about digital cameras, perhaps to purchase a book. In either case, users' attention is focused on whatever gets them to their goal; they ignore everything else. When users enter search queries, the targeted ads that the engine returns relate directly to what users are after. Hence, they look at and follow the ads. Indeed, such advertisements probably have an advantage over the plain search results because they show both that the advertiser is competent and has a direct interest in serving consumers.
Targeting User Goals
So, the secret to success is to make an advertisement fit with the user's goal. To this end, text-only ads are superior because they get right to the point. Fancy graphics exist to attract viewers, but with targeted ads, the viewer's attention is already guaranteed. You should thus forget the extraneous flourish and simply deliver the sales pitch -- along with a link to a specific page of detailed information. The landing page (with product or payoff information) should serve to close the sale; expecting to provide enough information in the ad itself to do so is impractical. Those designs that try to squeeze an entire user interface into a tiny ad are missing the entire point of hypertext.
Now, it might be tempting to present your successful search page ad as a pop-up, or in a news site, or somewhere else. But if you do, it will simply be ignored because it isn't part of the goal: users now want to read the news, or do whatever it is that initially drew them to the site, and advertisements -- no matter how enticing or relevant to users' other interests -- will be ignored.
However, when users complete their main task, they're then ready for advertisements. And guess what? The ads are gone.
In Praise of Persistence
Many a time we've been working on a site and noticed an interesting, relevant advertisement. This typically happens in the dead time between clicking a link to follow some item in depth and getting a refreshed page. So, we make a mental note to return and follow up on the ad. Oops, we can't. When we go back, there is a different advertisement, breaking one of the oldest principles of interaction design: stability.
As long ago as 1984, the Macintosh human interface guidelines explained that designers should avoid having the computer yank things away from users. (That's why it's so annoying when you go to a folder and Windows has changed the view you specified for that folder on your last visit.)
Notice what happens when you read a newspaper. You turn the pages, following a story, and your eye happens upon an advertisement youre interested in. Most likely, you'll keep reading the news story, but make a mental note to go back to the ad. When you do, guess what? The ad is still there.
Websites should permit a similar process. Don't attempt to disturb people in the midst of their task -- it won't work. But once they've finished the task, let them follow or return to the ads.
Why not make it possible for users to review ads after they rotate off the screen? If every site that featured rotating, dynamically generated ads simply offered a button at the ad location -- "view last 10 ads here" -- we predict that advertisement success rates would increase. (This is a guideline similar to one we know works well for homepages: to link to archives of recent features and promotions.)
Aiming for Ad Success
Reach users when they're interested and have the time -- dont bother them when they're least likely to attend. Unfortunately, most current Web advertising approaches are aimed at taking what doesn't work and making it ever bigger and more annoying, continuously fighting user behavior. Moving in the wrong direction at a faster pace is not a very insightful strategy.
Want ads to work? Accept that Web design is interaction design. Understand hypertext. And, most importantly, understand the psychology of the viewer.