Effective Online Advertising Delivers Measurable Results
Effective online advertising emphasizes both branding and response. Its effectiveness is highly measurable.
The branding part comes in the form of text and multimedia. The multimedia is a photo, graphic, audio, video, company logo or some combination of the above.
An advertiser uses branding to communicate a visual idea to the target audience.
The response part comes in the form of a reaction by that target audience. It could be a click on the ad, picking up the phone to call the company that is running the ad (if the phone number is in the ad) or going to the place of business (if that business has an accessible physical location).
Branding and response are the key goals of nearly all forms of advertising.
Search Versus Display Advertising
Search advertising is the dominant form of advertising on the Internet thanks to the overwhelming market share of the Google, Bing and Yahoo! search engines.
This simple, textual advertising captures 43 percent of all advertising revenue compared to 19 percent for display, according to research from the Internet Advertising Bureau.
But search and display differ greatly when it comes to branding and response. Search advertising is low on branding and high on response. Display is the complete opposite.
The reason why is that the typical search ad is simply a few lines of text without any images at all.
For that reason, it cannot communicate an image for the sake of brand. Instead, its goal is capturing the click by appearing next to relevant search results.
Relevancy Increases Click Rates
That relevancy increases the click rate, which is a key measure of effective online ads. In some cases, the click rate, which is the number of clicks divided by ad impressions, can exceed 10 percent or more while the average is about 3-4 percent.
Display advertising as the result of having an image creates a strong branding environment. A Realtor can display a house. An auto dealer can display a car. A personals site can display an attractive person. These images capture the attention of a Web site visitor because they are designed to be attractive.
The challenge with display advertising is the response rate compared to search advertising. Research indicates that the average national click rate on display ads is only about 0.1 percent.
For display ads, one way to make up for the lower click rate and increase branding at the same time is by increasing the size of the ad.
Three sizes dominate the Internet landscape at this time — 728×90 pixels, 300×250 and 160×600. These three sizes along with 180×150 make up the Universal Ad Package of the Internet Advertising Bureau.
The 728×90 usually appears at the top of a page either above or below the site logo. The 300×250 usually appears on the right side of the page, while the 160×600 appears on either a left column or right column. (Note that this site, HubPages.com, also uses the 300×600 size.)
The 728×90 and 300×250 are the most popular sizes because of their ability to communicate visually, accommodate photos and graphics and integrate easily with the rest of the page.
Location is critical for effective online advertising. The 728×90 gets a higher response rate because it appears at the top of the page. Site visitors don’t have to scroll in order to see it.
The same is true for the 300×250 if it appears at the top right of the page.
If an ad appears below the status bar or bottom of the Web browser, and the visitor doesn’t scroll down far enough to see it, the click rate naturally will be much lower.
Because the click rates for impressions at the top of the page are higher, the advertiser should expect to pay a higher rate while ads at the bottom of the page should cost a lower rate.
Cost per thousand or CPM is the dominant pricing model for display advertising. Cost per click of CPC dominates the search environment.
When an ad appears once, that appearance is counted as an impression.
The standard practice in the industry is counting impressions in groups of 1,000.
Online advertising rates mostly follow two approaches: cost per 1,000 impressions (CPM) and cost per click (CPC).
Cost per thousand means that the display advertiser pays a certain rate for every 1,000 impressions, such as $5 per thousand.
If they bought a campaign with 10,000 impressions, the total cost would be $50 ($5 per 1,000 x 10).
Cost per click means the advertiser pays only when someone clicks on the ad.
Using the example of 10,000 impressions, if an advertiser signs an agreement to pay $1 per click and receives 50 clicks, he or she would also pay $50.
How to Use CPM or CPC
The first pricing method is useful when branding is an important part of the ad campaign. The second pricing method works better when the advertiser is interested in branding, but also wants to see a high response rate as well.
Cost per click gives the advertiser an advantage because he or she could literally get 10,000 impressions, receive no clicks and get all of that branding without paying a cent.
That puts all of the risk on the publisher. The other problem with cost per click with display advertising is that it doesn’t pay the publisher for other forms of response. They are mainly phone calls if the ad has a phone number and in-store visits if the business is local.
For those reasons, cost per thousand is the dominate pricing model for display advertising, while cost per click is dominant with response-oriented search advertising.