There's another thread over on the digital forum asking the exact same question.
As I said over there, of course they don't "work" in the current climate.
Research from ADTECH last year showed that click rates in March 2007 were, on average, just 0.18%, down from 0.33% in 2004. In more mature markets, like Finland and Denmark, rates are even lower at 0.11% and 0.09%.
Targeting and relevancy help uplift response rates, (up to 250%) but no one in digital really seems to understand how you might go about that, from what I can tell.
In their rush to tell us they've taken over the universe, the digital people seem to have forgotten all the basics of selling. "But look it moves!"
Given the right knowledge and expertise, with people asking the right questions, banner advertising can surely work better.
But right now, it's basically useless.