Choosing the Right Advertising Model for Your Website

For most of us involved in digital media advertising, the question about which pricing model works best for a specific campaign is clear. But when it comes to choosing the right model, publisher websites are stuck wondering.

Here are a few steps that will help you earn money from your website the most efficient way, and remember that choosing the right advertising model can drastically increase your revenue. Some of the factors that will help you choose the right advertising model are very obvious such as niche, the number of unique users that your website attracts, the demographical breakdown of the users, the number of page impressions that it generates, etc.

Let’s go over the three main advertising models, their respective pros & cons and explaining when to use them.

CPM (Cost-per-Mille) – in Latin mille means thousand

An impression is counted every time one of your users sees a text or banner advertisement on your website. If your website generates a significant amount of page views (page impressions), CPM is definitely the model you might want to implement, however, keep in mind that with CPM you will not get any money from clicks. If you can generate a high number of clicks on your website than you might want to consider a CPC model (See further below).

CPM is a profitable model if your website generates high traffic/low clicks but certainly will not be as profitable for advertisers who are running call to action campaigns as they will have a very low Return on Investment (ROI) and might not consider selecting your website for future campaigns unless you give them a good deal. However, advertisers who are planning to launch an awareness campaign might be delighted by the visibility you can provide amongst your users.

CPM is also considered a risk free model for publishers (website owners) as the only thing they really do is deliver the number of impressions that an advertiser books without worrying about the performance of the campaign. This one-sided environment made advertisers search for a better model, one that can guarantee some sort of performance, thus the birth of the CPC model.

CPC (Cost-per-Click)

CPC is considered to be a very simple formula that satisfies both the publishers & the advertisers in a fair environment. For the advertiser to benefit from the clicks that an ad placed on a publishers’ website generates, he has to make sure that the specific ad is relevant to his product and/or offer so that a percentage of these clicks turns out into goals/objectives. On the other hand, the publisher has the mandate to properly place the advertiser’s banner on his website so that it generates the most clicks, better yet, the most quality clicks (relevant clicks to the target audience) knowing that a good performing campaign will result in a good ROI, thus driving the advertiser to keep spending money on clicks, campaign after campaign, and for longer periods.

One of the very few problems of the CPC model is the possibility of running into click-frauds. A click-fraud occurs when an automated script attacks a website and generates hundreds of fake clicks on a banner, turning a successful campaign into a nightmare. Combating this fraudulent method is something that any publisher has to keep in mind before opting to use a CPC model.

CPA (Cost-per-Action)

CPA model throws all the risk on the publisher, plain and simple. A publisher must know that his traffic is guaranteed to generate actions (e.g.: form submission, registration, purchase, etc.) or else he’d be giving it out for free, without generating any income. If you have ideal traffic i.e. high traffic which converts well, then this is your best bet. What you need to do as a publisher to ensure a profitable CPA model, is make sure that an advertiser’s campaign follows certain standards because you don’t want to end up serving free advertisement for clients whose ads are irrelevant to begin with.

As an advertiser, a CPA model represents the best ROI possible for your campaigns. Obviously, you are only paying for the leads you are getting, thus minimizing your risks.

Final Note

There are many who argue that all three pricing models are just different flavors of the same thing. In a way this notion is not faulty since all three models rely on common numbers to estimate the final cost.

Example: An advertiser wants to sell 100 carpets at $100 apiece. His 75% margin gives him a profit of $75 per item before advertising cost. His cost of goods is $25 by default.

Here’s the simulation of all 3 models:

In the first simulation the advertiser buys 100 CPM at $5/per for a total cost of $500. His campaign generates a CTR of 2% and generates 2,000 clicks to his landing page. Let’s say that 5% of those clicks turned into a sale, that’s a total of 100 sales and $10,000 in cash money. His total gross is $10,000, Total advertising cost = $500 and Total cost of goods is $2,500 and that leaves him with a total net profit of $7,000.

Using CPC model, the same advertiser pays $0.25/click. The same budget of $500 will generate 2,000 clicks for him. 5% of those clicks turned into a sale, that’s a total of 100 sales and $10,000 in cash money. His total gross is $10,000, Total advertising cost = $500 and Total cost of goods is $2,500 and that leaves him with a total net profit of $7,000 just the same.

Finally, Using the CPA model, the advertiser pays $5/lead (5% Commission). The same budget of $500 will generate 100 sales for him and $10,000 in cash money. His total gross is $10,000, Total advertising cost = $500 and Total cost of goods is $2,500 and that leaves him with a total net profit of $7,000 just the same.

So for every price in one model there’s a price for the other two and that’s exactly how publishers & search engines, alike, calculate the different pricing options and sell them. At the end of the day, the model that sells the best is the model that keeps the advertiser feeling happy, safe and profiting without taking a huge risk and in turn making a good profit for the publisher as well.

The Importance of Building an Efficient Online Marketing Strategy

Getting your business involved in multiple Internet marketing activities is already a good step forward, but understanding how to optimize your dollars spent, is the real key to success!

The efficiency of a well-built Online Marketing Strategy will enable you to maximize and monetize your online expenditure.

The core issue is to know how to deploy those activities in a manner that will be fully integrated to your overall Marketing Strategy, while moreover ensuring your strategy is developed to achieve your goals.

Whilst drafting your digital strategy, your sales and communication objectives along with your target audience should be your primary focus. Defining your objectives are often the hardest to set in stone, but understanding your customer’s behavior online is an even greater challenge.

Based on the above, you need to ensure your offline and online marketing strategies are well integrated together. This will enable you to maximize your visibility, further the brand engagement, and in turn, learn who your customers really are.

From this point forward, you will be able to aim at a measurable ROI.

Related articles:

The 17 Rules of Social Media Optimization
Measuring up to Social Media Efforts

The "Fifth" P of Marketing

Marketing 101 teaches us that acute marketing decisions should take into four main aspects into consideration: Product, Price, Place and Promotion (4 P’s). However, what Marketing 101 does not teach is the importance of the 5th P of marketing.

I would divide the “Fifth” marketing P into two halves that are of equal importance: People (listen) then Participation (engage). Assuming that your passive one-way communication model will be enough for you to be a successful marketer is the easiest road to failure. Web 2.0’s social media services have helped businesses reach out to consumers and encourage brand loyalty through an active two-way relationship.

To conqeur the 5th P, marketers should take the following steps:

– Step one is to listen to the customers for which you have to monitor all talk that is generated about your company. Listening to your target marketing and monitoring conversations that are related to your brand will help you understand your customers’ behavioral patterns and your customers’ perception of your brand.

– Step two is to engage in the conversations. This can be done by participating in existing blogs (commenting), tweeting and retweeting (Twitter), sending e-mails, creating chat rooms on your website where customers can talk to you about their problems, and even by allowing customers to post testimonials about your brand and company. Participation means allowing the customer to have a say in the company’s actions, making sure that they are involved in the entire brand loyalty process, rather than being led by the company. The goal of your participation should be convincing your customers that you are interested in their welfare.

Adding the 5th P to a brand’s marketing mix could play a key role in your brand’s success. Build the right community around your brand, be honest with your customers and give them the tools to create and share right alongside you.

Can online banners be scented?

Click-through rates tell a lot about an online marketing campaign’s performance – especially if a click-through rate is 43x the global average.  When Kaiak asked for a creative idea to introduce their fragrance online, TBWA answered with a brilliant one – Scented Banners! Banners cannot have real scent, or can they?

To execute the idea, TBWA sponsored 15 lan houses across Brazil and installed custom scent strip producers on the back of the screens so when people click the special Kaiak banner, the producers instantly deliver  real life samples from the back of the screens!

Results: 10,000 scented strips were distributed in one weekend!

Geo-Targeted news updates: Evacuation of Times Square

The Wall Street Journal’s check-in to Times Square, last week, shifted the way location-based news services have been used up till then. After teaming up with Foursquare, the location-based news update service, the WSJ showed a new means of using the service, changing the perception of geo-targeted news.

WSJ Times Square evacuation news update on Foursquare

Foursquare, which has been known mostly for food-related and fashion reviews, offered the WSJ the infrastructure to dispatch news about the evacuation of Times Square to those who are mostly concerned – the people who happened to be in Times Square the moment the news broke out.

Previously, users who followed a certain branded place or location, subscribed to get location-related information without having to specifically check-into the location through Foursquare. Location happened to be incidental information in a piece of news. However, what Foursquare enabled the WSJ to do was to check-in to the Times Square and alarm people about the evacuation –  “Location” in this becomes the news. “Times Sqaure evacuation” is a noteworthy piece of news – no doubt; however, it was much more pertinent to those who are in Times Square rather than those who are not.

With twitter geo-tagging apps such as TrackinU and Facebook anticipated “places” feature, it will be interesting to see how the peer-to-peer location-based titan Foursquare takes the “location-based” news frenzy to the next level.

Blogging vs Status-updating

Businesses, content publishers media channels have been pushing for blog creation as a way of engaging existing and reaching new readers. With 133 million blog posts submitted on Technorati since 2002, blogging is deep-rooted in all mainstream online media.

So why do I believe that blogs are losing popularity to Status-updating?

With the popularity and inescapabilty of microblogging and activity streams and time lines, Twitter, Facebook, FriendFeed and the like are competing to build a community around the status-updating system – the state of publishing, reading, responding to, and sharing micro-sized updates.

This new trend of pacey interaction is further scattering the conversation and is growing online interaction beyond the host site through syndication to other relevant networks and communities. Those who might typically respond with a formal blog post (on the host site) may now choose to respond with a tweet or a status update.

Blog posts are increasingly being shared in micro communities and social networks which is detouring attention and time away from posts on the host website or blog. Social network users comment back on shared blog post, creating conversations away from the original blog post. We are learning to publish and react to content in “Twitter time” while spending less time blogging, commenting directly on blogs, or writing blogs in response to blog sources because of our active participation in micro communities.

Likes and RTs (retweets) on Facebook and Twitter and posting shortened links that connect friends and followers back to the source post, have changed our behavior regarding blogs and made us major players in defining the evolution of the connectivity and dissemination of online content.

Technorati might not have foreseen it, but Twitter and Facebook might as well be its next biggest competitors.