How Online Advertising Works?

Advertising, whether online or offline, has a number of objectives:

• Building brand awareness
• Creating consumer demand
• Informing consumers of the advertiser’s ability to satisfy that demand
• Driving response and sales

Building Brand Awareness

Making people aware of a brand or product is an important long-term goal for any marketer. Once customers know about the brand, the marketer has taken the first step towards gaining the customer’s trust and patronage. The better known a brand is the more business they can do. And the ultimate goal is to do more business and sell more of the product.

Online, creative advertising or banner advertising is largely visual, making it an ideal channel for promoting brand collateral.

Creating Consumer Demand

Consumers can’t want what they don’t know about. Advertising needs to convince consumers about what they should want and why they should want it. Modern online advertising provides a great way to communicate the USPs (unique selling points) of a product, thereby helping stimulate demand.

Satisfying Consumer Demand

Once the consumer is aware of and desires a product, they need to find out how to satisfy that desire. If brand building has been effective, they will know that a particular brand exists. At this point, it is important for the marketer to show the consumer how their particular brand or product will best meet that need.

Driving Response and Sales

All forms of online marketing need to drive traffic and sales in the long term. However, the immediacy of online advertising also drives traffic and sales in the short and medium terms. Unlike traditional media advertising, online advertising can turn the potential customer into an actual customer right there and then. What’s more, it is possible to measure accurately how effectively the online advertising campaign does this.

The Key Differentiator

Online advertising is able to drive instant sales and conversions. Unlike offline advertising mediums, the consumer can go from advert to merchant in one easy click. Because of the connected nature of the Internet, online activities are highly trackable and measurable, which makes it possible to target adverts and to accurately track and gauge the effectiveness of the advertising. Each display advert can be tracked for success.

How to show your message:

Types of Display Advertising
There are many different ways to display messages online, and as technology develops, so does online advertising. Here are some of the most common.

Interstitial Banners
These are banners that are shown between pages on a web site. As you click from one page to another, you are shown this advert before the next page is shown. Sometimes, you are able to close the advert.

Pop-ups and pop-unders
As the name suggests, these are adverts that pop up, or under, the web page being viewed. They open in a new, smaller window. You will see a pop-up straight away, but will probably only become aware of a pop-under after you close your browser window. These were very prominent in the early days of online advertising, but audience annoyance means that there are now “pop-up blockers” built into most good web browsers. This can be problematic as sometimes a web site will legitimately use a pop-up to display information to the user.

Map Advert
This is advertising placed within the online mapping solutions available, such as Google Maps.

Floating Advert
This advert appears in a layer over the content, but is not in a separate window. Usually, the user can close this advert. These are sometimes referred to as Shoshkeles, a proprietary technology. Floating adverts are created with DHTML or Flash, and float in a layer above a site’s content for a few seconds. Often, the animation ends by disappearing into a banner ad on the page.

Wallpaper Advert
This advert changes the background of the web page being viewed. Usually, it is not possible to click through this advert.

Banner Advert
A graphic image or animation displayed on a web site for advertising purposes. Static banners are GIFs or JPEGS, but banners can also employ rich media such as Flash, video, JavaScript and other interactive technologies. Interactive technology allows the viewer to interact and transact within the banner. Banners are not limited to the space that they occupy; some banners expand on mouseover or when clicked on.

Standard banner sizes
There are standard sizes (measured in pixels) for banner advertising, whether the banner be static, animated or rich media. Creating banners to suit these sizes means that the banners will suit many web sites (advertisers sell space in these sizes as well). And here, size does matter, in that you can expect varying results in click throughs and conversions across the range of sizes. If you want to know what works best for your brand, test.

How to Pay
Payment models for display advertising - As well as a variety of mediums, there are also a number of different payment models for display advertising.

CPI or CPM
CPI stands for Cost Per Impression. This means the advertiser pays each time the advert appears on the publisher’s page. The most common way of referring to this model is CPM or Cost Per Thousand impressions (the letter M is the Roman numeral for a thousand). This is how a campaign is normally priced when brand awareness or exposure is the primary goal.

CPC
CPC stands for Cost Per Click. This means that the advertiser only pays when their advert is clicked on by an interested party. CPC advertising is normally associated with paid search marketing, also called Pay Per Click (PPC) advertising. Banners can be priced this way when the aim is to drive traffic. It is also a payment method sometimes used in affiliate marketing, when the aim is to drive traffic to a new web site.

CPA
CPA refers to Cost Per Acquisition. This model means the advertiser only pays when an advert delivers an acquisition. Definitions of acquisitions vary from site to site and may be a user filling in a form, downloading a file or buying a product. CPA is the best way for an advertiser to pay because they only pay when the advertising has met its goal. For this reason it is also the worst type for the publisher as they are only rewarded if the advertising is successful. The publisher has to rely on the conversion rate of the advertiser’s web site, something which the publisher cannot control. The CPA model is not commonly used for banner advertising and is generally associated with affiliate marketing.

Flat Rate

Sometimes, owners of lower-traffic sites choose to sell banner space at a flat rate i.e. at a fixed cost per month regardless of the amount of traffic or impressions. This would appeal to a media buyer who may be testing an online campaign that targets niche markets.

Cost Per Engagement
This is an emerging technology in which advertisers pay for the rollover adverts, placed in videos or applications (such as Facebook applications), based on the interactions with that advert. “Engagement” is generally defined as a user-initiated rollover, or mouseover, action that results in a sustained advert expansion. Once expanded, an advert may contain a video, game, or other rich content. It happens without taking an Internet user away from her preferred web page, and marketers only pay when an individual completes an action.

CPM favours the publisher, while CPA favours the advertiser. Sometimes, a hybrid of the two payment models is pursued.

Typically, high traffic, broad audience web sites will offer CPM advertising. Examples include web portals such as www.yahoo.com or news sites like www.news24.com. Niche web sites with a targeted audience are more likely to offer CPA advertising to advertisers with an appropriate product. These can also fall under the umbrella of affiliate marketing.

Types of advertising can be seen on a scale from more intrusive (and thus potentially annoying to the consumer) to less intrusive. In the same way, payment models can be scaled to those that favour the publisher to those that favour the advertiser.

When planning a campaign, it is important to know how the advertising will be paid for and what kinds of advertising are offered by publishers. A lot of this can be solved by using a company that specialises in advert serving, media planning and media buying.

Ad servers and advertising networks
Ad servers are servers that store advertisements and serve them to web pages. Ad servers can be local, run by a publisher to serve adverts to web sites on the publisher’s domain, or they can be third-party ad servers which serve adverts to web pages on any domain. Ad servers facilitate advert trafficking and provide reports on advert performance.

An advertising network is a group of web sites on which adverts can be purchased through a single sales entity. It could be a collection of sites owned by the same publisher (e.g. AOL, CNN, Sports Illustrated, etc. are all owned by AOL/Time Warner) or it could be an affiliation of sites that share a representative.

The advertising network acts as an intermediary between advertisers and publishers, and provides a technology solution to both. As well as providing a centralised ad server that can serve adverts to a number of web sites, the networks offer tracking and reporting, as well as targeting.

The benefits of ad servers
Rather than distribute copies of each piece of creative advertising to each publisher or media buyer, you can send out a line of code that calls up an advertisement directly from the ad server each time an advert is scheduled to run. The agency loads the creative to the server once and can modify rotations or add new units on the fly without needing to re-contact the vendors.

The ad servers provide a wealth of data including impressions served, adverts clicked, CTR and CPC. Most of the ad servers also have the ability to provide performance against post-click activities such as sales, leads, downloads, or any other site-based action the advertiser may want to measure.

Ad servers provide a consistent counting methodology across the entire campaign enabling the advertiser to gain an “apples to apples” comparison of performance across the entire media schedule, which includes multiple web sites.

The ad server also allows sophisticated targeting of display advertising.

Tracking
The trackability of online advertising is what makes it so superior to pasting pictures around town in a bid to boost your brand. Not only can an advertiser tell how many times an advert was seen (impressions), but also how many times the advert was successful in sending visitors to the advertised web site (clicks). And, as discussed in the chapter on conversion optimisation, the tracking needs to continue on the web site to determine how successful the advert has been in creating more revenue for that web site (conversions).

As well as tracking adverts being served and clicked on, advertising networks can also provide information about the people who saw the advert as well as those who acted on it. Here is some of the information that can be provided:

• Connection type
• Browser
• Operating System
• Time of day
• ISP

Many ad servers will set a cookie on impression of an advert, not only on click through, so it is possible to track latent conversions (within the cookie period).

And the best thing? Using this information, the advertising networks can target the display of advertising, helping advertisers to optimise campaigns and get the most from the advertising spend.

Targeting and optimising

Advertising networks serve adverts across a number of web sites, and can track a user visiting web sites in the network using cookies or IP addresses.

This means that advertising networks can offer advertisers:

• Frequency capping: the network will limit the number of times a user sees the same advert in a session.
• Sequencing: the network can ensure that a user sees adverts in a particular order.
• Exclusivity: ensure that adverts from direct competitors are not shown on the same page.
• Roadblocks: allowing an advertiser to own 100% of the advertising inventory on a page.
• The advertising network can also target adverts based on the business rules of the advertiser or based on the profiles of the users:
• Geo-Targeting: online advertising has the ability to target markets by country, province or city, and can even drill them down to something as specific as their IP address.
• Operating System / Browser Type: markets can further be targeted via networks or browser types such as Firefox, Internet Explorer, Safari, etc.
• Connection Type: users can be segmented and targeted according to their Internet connection type, e.g. whether they use broadband or dial up connections.
• Day and Time: advertisers can choose the time of day or day of the week when their adverts are shown. Advertisers can specify when their campaign should air, down to the minute. This usually depends on the client’s objective for the campaign or the product itself.
• Social Serving: web sites gather personal data about users and then serve each user with targeted and relevant advertising. For example, Facebook will allow advertisers to select specific characteristics of users who will be shown an advert.
• Behavioural Targeting: the advertising network uses the profile of a user (built up over previous web sites visited) to determine which adverts to show during a given visit. Networks can base this profile on cookies or on IP addresses. For example, the network may choose to show adverts for pet insurance on a news page to a user who has visited the pets and animals section of a general media site previously.
• Contextual Advertising: the ad server infers the optimum adverts to serve, based on the content of the page. For example, on an article about mountain bike holidays in Europe, the network would serve adverts for new mountain bikes, or adverts from travel companies offering flights to Europe, or perhaps adverts for adventure travel insurance.

Advertising Exchanges
Advertising networks are also creating advertising exchanges, where publishers can place unsold inventory for bidding. The inventory is sold to the highest bidding advertiser. Giving advertisers far more control, this type of advertising mimics a PPC based model of paid search bidding (Generalised Second Price auction) – but bids are for audience profiles and space rather than for keywords. It allows publishers to fill unsold inventory at the highest available price, and can give smaller advertisers access to this inventory.