This is an older article, but it’s still very relevant and information. Enjoy!
The Pink Locket
|Story by exboyfriend
Published on October 10, 2007 in How-To
|Photo by DragonflyCrafts|
Meredith Keller is an artist for Ex-Boyfriend and the founder of IShopIndie.com, an advertising co-op for indepedent designers. She has extensive experience running internet advertising and promotional campaigns on the internet for Ex-Boyfriend and IShopIndie.com. She has served as a consultant to other internet businesses on how to promote online. She has recently launched a service that is dedicated to co-op based promotion for independent online retailers.
CPM, ROI… WTF?!
Muddling your way through the online advertising world can be tricky business. It’s got a lingo all its own and requires finesse to make the most of your advertising dollars. In the following article, we’re going to discuss the most common ways internet advertising is sold and the benefits and drawbacks of those models.
CPM advertising — CPM stands for cost per mile. In English, it means the amount you will pay for every 1,000 impressions. (An impression means your ad has been viewed.) So, if a website says their advertising is $10/CPM, and you spend $500, your ad will receive 50,000 impressions. Is this a great deal? Well, maybe, but it depends on what you are comparing it to.
The average banner ad campaign typically results in a click-through rate of less than 1%, so you are probably going to get 500 or fewer people visiting your site in the above example. You may see an above-average click-through rate depending on several factors, though. Consider the placement of the ad; is it going to be highly visible to site visitors? Is the ad a terrific match for the site you are going to advertise on? Maybe you sell yarn; a good match would be to advertise on a website for knitters. If you’ve got an especially eye-catching, fantastic ad, it might perform exceptionally well on that site and you might see an above-average click-through rate and above-average conversions (“conversions” is a fancy way of saying sales).
CPC advertising — Cost per click advertising means you only pay when your ad is clicked on. Sounds like a pretty good deal, right? Maybe, maybe not. Google Adwords is one of the biggest providers of CPC advertising, and they have a huge audience to offer you.
One issue with CPC advertising is poor click quality can burn up your budget with no sales to show for it. If you’ve selected popular keywords, you might be paying $1-$2 per click and getting lots of people on your site, but they’re just coming to browse with no intention of making a purchase. This can easily burn up a small budget with nothing to show for it. If you have a large budget, the losses you will be taking from this type of visitor behavior might be acceptable, but if you’re strapped for cash, this might not be the best deal for you.
The other major issue with CPC advertising is click fraud. Generally, the way CPC works is that content providers (bloggers, website owners, etc.) have a relationship with CPC providers like Google. The arrangement is that the content provider, such as a blogger, will run ads for a company like Google and the content provider gets paid when people click from their site to yours. Unscrupulous “content providers” have come up with elaborate ways to foil Google’s system so that they get paid and you get nothing. You’ll know this is happening when you check out your site’s web statistics and you see in your list of referrer sites like freecheapvacationsnow191.ws. If you go check out the site, you’ll see it actually has nothing on it but adword campaigns and pop up ads. This site didn’t deliver you a potential customer at all; it’s a site owner who is manipulating Google’s ad serving software for profit at your expense. You could spend all day blocking these fraudulent sites, but that will be an ongoing job for you. You could also block Google’s content network, but this means you are keeping your ad out of sight from a potentially large audience. There’s no right or wrong approach to dealing with this problem. It’s something you will have to determine how to address on based on your own unique marketing campaign, budget and products.
CPC advertising is probably most compatible with products people actively seek out, rather than products people purchase on impulse. A CPC campaign would be great if, for example, you were an internet retailer selling used replacement car parts. Generally people who need a alternator don’t just see an ad for “alternators” and think “I’d love to have one of those.” Typically, customers for a company like that will seek out that company’s products when the need arises. So for a company like that, having their link pop up when people search “used alternator” on Google would be ideal. If you sell something that’s more of a luxury or novelty item, you might be better off with another form of advertising.
Flat Rate Advertising — Many content providers have a flat rate that they charge to advertise with them for a set amount of time. For example, a blog might charge you $100/week or $300/month. The nice thing about this model is that content providers who sell their advertising this way often make discounted pricing available to advertisers who commit to several months of advertising at once.
Evaluating flat rate advertising can be tricky, because this form of advertising can be a stellar deal or a huge waste of money.
To evaluate this kind of opportunity, you will want to know about the site’s average number of page views and unique visitors. Keep in mind that the average click-through rate is less than 1%, so if a site wants $500/month and they get 1200 unique visitors per day, on average you are probably only going to see about 360 visits from this ad. You might wind up with a better click-through rate if the site is particularly well-suited for marketing your products or if the site includes a newsletter mention or an advertorial (an editorial write-up advertising your product or service, paid for by you) with the deal.
The next thing you want to consider is click quality. Click quality refers to how great these clicks are going to be for you. Are these click-throughs likely to result in conversions for you? If you are selling expensive items and you advertise on a site whose readers have an average household income of $30,000/year, you might see lots of click-throughs but no sales because the audience just can’t afford your products. To evaluate click quality, you will want to ask the advertising venue for a media kit. This media kit should tell you some statistical information about their audience. This information may include gender, race, geographic location, and/or average household income. All of this data can indicate the kind of click quality you can expect. Many venues that offer flat rate advertising allow you to buy a short-term ad at a somewhat inflated price. Meaning they may charge $300/month, but they will let you try an ad for $100 for one week. If you are unsure about the ad venue you’re considering, this is a great way to test the waters.
BlogAds — A marketplace for blog advertising. Offers self-service ad purchases, flexible terms and sites that are appropriate for a variety of budgets.
Google Adwords — The leading provider of cost-per-click advertising.
Federated Media — CPM based advertising available for a variety of blogs.
I Shop Indie — The author’s co-operative internet advertising for indie designers.
Merkell.net — The author’s service dedicated to co-op based promotion for independent online retailers.