Traditional newspapers are dying, and the Internet is to blame. As businesses shift more of their advertising budgets online, traditional print, billboard, and even radio ads are getting a much smaller piece of the marketing pie.
According to a study by IDC, a global provider of market intelligence and advisory services for the technology industry, Internet advertising will increase about eight times as fast as traditional print advertising over the next four years. Along the way, Internet advertising will jump to the No. 2 spot as the preferred medium for advertisers. That's second only to direct marketing -- and way ahead of newspaper, television, and radio advertisements.
Traditional media is losing out to online advertising because businesses now know that online advertising can give them more bang for their buck.
Why online advertising works
Businesses both large and small are spending more money on Internet advertising because the Web holds these three unbeatable advantages over traditional advertising:
- Targeting: Online advertising allows you to target specific groups of people. You can target consumers who are shopping for your product or service -- and even those in your particular region.
- Tracking: You can track who acts on your online ads, when, and where. So if you notice that you're receiving a lot of traffic around 2:30 p.m. from a particular Web site, you can increase your exposure during that period while lowering it during the slowest periods.
- Immediacy: You no longer have to wait weeks or months to launch or change ad campaigns. You can place ads anywhere in the world in a few hours, and make changes to them even faster.
Many advertisers today use the tracking potential and immediacy of the Internet marketplace to determine which ad to run. They'll test two or three potential ads first. If one ad is really strong with their target audience, they'll then use that one for their full campaign. You can even customize your ads for different Web pages.
And don't make the mistake of thinking that only the biggest advertisers are able to take advantage of the Internet. The Web marketplace is very democratic and allows small agencies to look and compete like the biggest companies.
Breaking down the language barrier
Once you have a strong Web site, you'll probably be tempted to attract traffic using online advertising. There's a lot to consider before you actually drop any ad dollars on the Web, however, and you first need to understand its unique language.
Here's our quick guide to the lingo of online advertising:
- Banner ads. Banners are the graphic ads found on Web pages. When someone clicks on that ad, they're taken to a landing page on your Web site. Banner ads range in size from small boxes to large horizontal or "skyscraper" vertical panels.
- Click. With online advertisers, this refers to the number of "click-throughs" generated by your online ad.
- Click-through. When someone clicks on your banner ad and is directed to your linked Web site page, each delivered visitor is counted as a click-through. It's the most common measure of an online ad's success. With pay-per-click (PPC) ads, it also determines how much you'll be charged for the ad.
- Impressions. This is the number of times the Web page displaying your banner ad was requested and therefore likely to be seen by users. Relying on impression data is tricky, however. Variables that affect how a page is opened and viewed can lead to impressions being under or over-reported.
- Cost per thousand (CPM). An online payment model where advertisers pay for every 1,000 times their ad is seen. Prices usually range from $1 to more than $50 per thousand impressions. This method is ideal if you want the cost of your advertising to be based on how many people see your ad. (By the way, the "M" in CPM is the Roman number for "thousand." You'll also hear CPM referred to as "cost per impression.")
- Cost per action (CPA). This online payment model requires advertisers to pay for every action (sale or registration) completed as a result of a visitor clicking on the advertisement. Prices usually range from $1 to $25, or a percentage of a sale (usually 5 percent to 25 percent). This method is more expensive, but you're only paying for actual customers -- not just leads or prospects.
- Cost per lead (CPL). This method allows advertisers to pay for every lead or customer inquiry that resulted from a click on their advertisement. Prices usually range from $1 to $10. Also known as cost per inquiry (CPI), this method is ideal if you have a high lead conversion rate.
- Pay per click (PPC). The advertiser pays for each click-through on their advertisement. Prices usually range from 1 cent to more than 50 cents per click-through. The amount paid per click is known as cost per click (CPC). This method is ideal if a high percentage of your click-throughs actually become solid leads.
- Click-through ratio (CTR) or click-through rate. This compares the click-throughs against the impressions. In other words, it's the number of people who clicked on your ad divided by the total number of people who saw your ad. If your ad was seen 1,000 times and was clicked on 13 times, the CTR for that ad would be 1.3 percent.
- Landing page. This is the specific page in your Web site that banner ads are linked to. The landing page usually has additional information about the advertiser's offer and provides an opportunity for the prospect to become a customer. It's usually a good idea to have banner ads link to a landing page that contains information specific to the offer in the ad, rather than just linking to your homepage.
- Conversion. This refers to a prospect's decision to act, such as making a purchase or registration -- thereby turning that prospect into a customer.
- Acquisition cost. This is what the advertiser ends up paying to generate each new customer or lead. This average is calculated by dividing the cost of your marketing efforts by the number of new customers those efforts yield. For example, a $5,000 ad campaign that results in 100 leads has an acquisition cost of $50 per lead ($5,000/100).
- Rich media. This label is used to describe online ads and other content that combine graphics, sound, video, or animation. They often allow the user to interact with the ad, with the goal of generating more interest -- and action. But they also tend to be more expensive to produce than regular static ads.
- Visitor quality. High-quality visitors are genuinely interested in the general type of product or service you're selling. There's a stronger likelihood that these visitors will convert into solid leads or clients. Attracting visitors using targeted promotions and offers -- rather than gimmicks -- is a good way to help ensure high visitor quality.
- Unique visitors. This measurement factors out repeat visits by the same prospect. It is generally considered to be a more accurate measure of Web site traffic than the number of hits to a Web site.
- Hits. Don't confuse hits with visitors. One Web page can contain several downloadable "files" -- and a Web site's "hits" actually refer to individual files being downloaded when a visitor views a page. Unique visitors are a better measure of a site's traffic.
Getting started
Once you're ready to invest in online advertising, it's time to compare the different online channels to see which will work best for you.
You could contact individual Web sites to arrange placement of banner or text ads on their sites. This is a good idea if you can identify the sites that many of your prospective clients will frequent. You even may be able to negotiate a better rate.
If you don't have the time to hunt down individual ad placements, there are also many advertising networks that will handle the placement of your ads in specific categories of Web sites.
But most advertisers tend to rely heavily on the biggest player in online advertising networks -- Google Adwords. In addition to placing your ads on relevant search engine results pages, Google Adwords will also place your ads on approved Web sites that get a cut of Google's fees.
Google Adwords is basically an auction site where you bid for keywords. Keywords are the terms used by people who use search engines to find relevant sites and pages. Higher keyword bids will give your ads the best exposure.
Fortunately, these are typically pay-per-click (PPC) ads, so you only pay when a visitor is delivered to your Web site.
The best thing about Google Adwords and other PPC ad networks is that you can launch an advertising drive with even small budgets. For more information, check out www.google.com/adwords.
Whichever ad network you decide on, make sure that your Web site and sales team are ready to convert visitors into genuine leads. You also need to be ready to make the necessary changes to keep improving your CPA and conversion rates.
Internet advertising provides powerful tools for all agents and brokers. But you need to use these tools to get the best possible returns. And you need to have the sales skills to convert these new leads into real clients.
Jeremiah Desmarais is vice president of marketing at Norvax. He can be reached at jdesmarais@norvax.com.
