Button Ad

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A graphical advertising unit, smaller than a banner ad.

Button ads come in a variety of sizes. There are standards such as 120x90, 120x60, 125x125 and 88x31 (micro-button), although nonstandard button ads are not uncommon. Whereas banners are often placed at the top or bottom of a page, buttons are often placed towards the middle of a page on the left or right sides.

Banner Ad

A graphical web advertising unit, typically measuring 468 pixels wide and 60 pixels tall (i.e. 468x60).

Love them or hate them, banner ads are one of the dominant forms of advertising online. Due to the widespread acceptance of the standard 468x60 banner ad size, buyers can easily secure placements at most sites, and publishers can accept ads from most advertisers.

Banner ads were initially judged primarily on the basis of click-through rate (CTR). In the early days of the Web, click-through rates were generally much higher than they are now, perhaps due to the novelty factor. Other causes for the decline in CTR may include technical limitations, the awkward horizontal shape, poor banner design, an excessive percentage of run-of-network buys, and accumulated bad experiences of Web surfers.

"Banners never work" is a common refrain from the anti-banner crowd. Although click-through rates have gone consistently downward, the same can be said of banner ad prices. It is still possible to achieve a click-through rate many times the industry average by combining good placement and design. Combining below-average ad rates and above-average response rates can lead to an acceptable return on investment, just as in any other advertising medium.

Text Ad

Advertisement using text-based hyperlinks.

Text-based ads, although common in email, have been dominated on the Web by their graphical-based counterparts.

Affiliate marketing is one area where text ads have flourished. However, many mainstream advertisers are only beginning to discover the power of text. Google has caused a buzz with its text advertising options, generating a self-proclaimed "click-through rate 4-5 times higher than industry standard for banner ads."

While lacking some of the advantages of graphical ads, text-based ads have some powerful advantages of their own. They download almost instantly and are not affected by ad blocking software.

Affiliate Marketing

Revenue sharing between online advertisers/merchants and online publishers/salespeople, whereby compensation is based on performance measures, typically in the form of sales, clicks, registrations, or a hybrid model.

The advertisers/merchants are typically referred to as affiliate merchants and the publishers/salespeople are referred to as affiliates.

Benefits of affiliate marketing include the potential for automating much of the advertising process (accepting & approving applications, generating unique sales links, tracking & reporting of results) and payment only for desired results (sales, registrations, clicks).

Paying only for performance shifts much of the advertising risk from the merchants to the affiliates, although merchants still assume some risk of fraud from partner sites.

Affiliate marketing has contributed to the rise of many leading online companies. Amazon.com, one of the first significant adopters, now has hundreds of thousands of affiliate relationships. It is not uncommon to see industries where the major players have affiliate programs--often structured in a similar manner and making similar competitive changes over time.

CPI - Cost Per Impression

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Cost per thousand impressions.

The CPM model refers to advertising bought on the basis of impression. This is in contrast to the various types of pay-for-performance advertising, whereby payment is only triggered by a mutually agreed upon activity (i.e. click-through, registration, sale).

The total price paid in a CPM deal is calculated by multiplying the CPM rate by the number of CPM units. For example, one million impressions at $10 CPM equals a $10,000 total price.

1,000,000 / 1,000 = 1,000 units
1,000 units X $10 CPM = $10,000 total price

The amount paid per impression is calculated by dividing the CPM by 1000. For example, a $10 CPM equals $.01 per impression.

$10 CPM / 1000 impressions = $.01 per impression

CPA - Cost Per Action

Online advertising payment model in which payment is based solely on qualifying actions such as sales or registrations.

The actions defined in a cost-per-action agreement relate directly to some type of conversion, with sales and registrations among the most common. This does not include deals based solely on solely clicks, which are referred to specifically as cost-per-click or CPC.

The cost-per-action (CPA) model is at the other end of the spectrum from the cost-per-impressions model (CPM), with the cost-per-click (CPC) model somewhere in the middle. In a CPA model, the publisher is taking most of the advertising risk, as their commissions are dependant on good conversion rates from the advertiser's creative units and Web site.

Marketers looking for cost-per-action deals have several options. Publishers with considerable excess inventory may be willing to consider nonstandard offers. Sites specializing in incentive programs are in a position to offer CPA pricing on various types of leads, although the usual caveats concerning incentivized traffic still apply. Perhaps the most widespread use of performance-based pricing is affiliate marketing, whereby merchants/advertisers determine what actions they want to reward and how much they are willing to pay.

PPS - Pay Per Sale

Online advertising payment model in which payment is based solely on qualifying sales.

In a pay per sale agreement, the advertiser only pays for sales generated by the destination site based on an agreed upon commission rate.

Paying per sale is often seen as the payment model most favorable to advertisers and least favorable to publishers. In such an agreement, the publisher must not only be concerned with the quality and quantity of his or her audience, but also the quality of the advertiser's creative units and destination site.

If possible, many publishers avoid sales-based agreements, preferring to stick to the CPM model. However, some publishers, facing weak ad sales, have little choice but to accept sales-based agreements to utilize remnant space.

For advertisers, pay per sale has some unique advantages compared to pay per click and pay per lead. There are fewer concerns about whether conversions are legitimate, and whether traffic is incentivized or of low quality.

CPC - Cost Per Click

The cost or cost-equivalent paid per click-through.

The terms pay-per-click (PPC) and cost-per-click (CPC) are sometimes used interchangeably, sometimes as distinct terms. When used as distinct terms, PPC indicates payment based on click-throughs, while CPC indicates measurement of cost on a per-click basis for contracts not based on click-throughs.

For example, consider a campaign where payment is based on impressions, not clicks. Impressions are sold for $10 CPM with a click-through rate (CTR) of 2%.

1000 impressions x 2% CTR = 20 click-throughs

$10 CPM / 20 click-throughs = $.50 per click

PPC - Pay Per Click

 

Online advertising payment model in which payment is based solely on qualifying click-throughs.

In a PPC agreement, the advertiser only pays for qualifying clicks to the destination site based on a prearranged per-click rate. Popular PPC advertising options include per-click advertising networks, search engines, and affiliate programs.

Paying per click is sometimes seen by some as a middle ground between paying per impression and paying per action. When paying per impression, the advertiser assumes the risk of low-quality traffic generated by the publisher. When getting paid for actions, the publisher assumes the risk of low-converting offers by the advertiser. In the PPC model, the publisher does not have to worry about the sales conversion rate of the target site, and the advertiser does not have to worry about how many impressions it takes to attract the specified number of clicks.

PPL - Pay Per Lead

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Online advertising payment model in which payment is based solely on qualifying leads.

In a pay per lead agreement, the advertiser only pays for leads generated at their destination site. No payment is made for visitors who don't sign up.

A lead is generally a signup involving contact information and perhaps some demographic information; it is typically a non-cash conversion event. A lead may consist of as little as an email address, or it may involve a detailed form covering multiple pages.

One risk to the advertiser is the potential for fraudulent activity by incentivized 3rd-parties or marketing partners. Some false leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.