Much talk has been made about performance advertising. When the Internet was just starting to take off before it became a modern-day utility more than a decade ago, traditional advertising enjoyed the immense patronage and confidence of large companies. Even small businesses have benefited hugely from the successes that traditional advertising has brought to their company’s bottom line.
But with the progress of the new media, and with the explosion of various social networks’ popularity, advertisers are now seeing a new way of getting their brands, products and services into the faces of their target audiences via the ubiquitous services various performance-based ad networks offer.
If you are an advertiser, it is worth considering the question whether subscribing to the services of a performance ad network gives value to your marketing dollar.
How does it work?
It has been tried and tested, and conversion for many companies was beyond expectation. However, conversion is only part of the performance-based ads’ story. This advertising model also proved to be remarkably cost-saving, as advertisers will only have to be charged for every action taken by customers. For example, if the performance-based ad model that a publisher chooses is the Cost-per-Click (CPC) pricing model, he will only be charged by the performance advertising network based on the number of clicks his ads received.
Based on this model, even though an ad gets 1,000 impressions, or views, but only gets 200 clicks, the publisher will only be charged on the 200 clicks that his ad got.
Apart from Cost-per-Click, there are other performance ad pricing models that a publisher can choose from based on his budget and his marketing goals.
CPM, or Cost-per-Mille charges the advertiser based on impressions, or number of times web visitors view the ad. The obvious drawback to this model is that the only action that can be drawn from the visitors is their viewing so that the publisher or advertiser gets charged even if visitors do not click on the ad.
CPA, or Cost-per-Action, very specifically refers to a performance advertising model that charges the advertisers whenever a customer completes a transaction using a credit card. This is also known as CPO or Cost-per-Order.
Performance-based or traditional advertising?
Is performance-based advertising model the right marketing avenue for your business? It all boils down to your company’s budget and risk tolerance. Small businesses may not have the substantial amount of budget needed for a full scale traditional advertising that many mega companies subscribe to. Traditional ads are somewhat a shotgun way of broadcasting a brand, but may, in some cases, return dismal results compared to the actual investments.
In performance advertising, the performance advertising network assumes the risks. That’s why they see to it that the ads they come up with are very targeted and produce a remarkable conversion rate.
