'Can You Make Our Logo BIGGER?'
This is one of the most frequent requests I get from clients when I am designing a website. And I'm not alone. There seems to be a generally accepted axiom that by making a logo larger, it becomes more prominent. It's an understandable assumption, but it's wrong.
Negative Space
One of the guiding principles of design is a concept called negative space, or "white space". By leaving unoccupied space around elements in a page (margins, gutters, etc.), the page becomes easier to scan (think about why people use bullet points and how those are laid out). So the way to get a logo, or any design element, to stand out more is to surround it with sufficient negative space. Take a look at the images below. Let's assume your logo is the dark blue circle in the upper left. Which one stands out more?

In fact, the smaller a graphic is, the more room there is around it to separate it from the other elements on the page and create some interest and hierarchy. Not to mention that without proper spacing, a design becomes crowded and less refined (and more importantly, it leaves your site visitors confused and wondering about the quality of not only the website but the organization as well).
Contrast
"...Nobody wants to be sold to. It's more effective to draw attention to the product/service/idea, get the customer excited - and only then say who brought you the message..."
Smaller logos, or at least not huge ones, also facilitate the delivery of your message (what you have to offer beyond your super-awesome logo). It's a design principle called contrast. To see this concept in action, take a look at The White House site. It uses a surprisingly small logo in the top center of its design, allowing the content to take center stage in the feature area below. The small logo provides contrast between the brand and the message. Remember, and as a designer it pains me to say this, the message is what's going to sell in the end. Similarly, the Carnegie and RISD sites put their branding on the back-burner which not only looks tasteful, but it puts the focus firmly on the content.
There are exceptions to the rule, of course, and they can work if done appropriately and with blatant exaggeration and intention. Sometimes things that are really large can be edgy, interesting and modern; but generally, "smaller=classier." Think about it, sophisticated people don't wear big gold chains to tell you how successful they are.
In summary, smaller logos suggests restraint, which in turn inspires confidence. They open the flow of the layout and create good contrast between the message and branding. Remember--bigger does not equal better, especially in web design!
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