An interactive marketing primer: Part I
—– Advertiser and publishers —–
I put the picture first, but the rest of this post will explain the pieces that are shown in the diagram. Note that this is a conceptual diagram, not a technical one, so for example the publisher does not transmit user segment data to the advertiser, instead segments are offered to the advertiser part of the sale of ad inventory. You can click on it to get a bigger version.
—– Ad inventory —–
A publisher has a certain amount of space on pages within the site that is set aside for ads; this is called the ad space. Then each page with ad space is served to a user some number of times during a given time period; this is called the page views.
The publisher’s ad inventory is then the ad space multiplied by the expected page views in a given time period. So a publisher’s monthly ad inventory would be the set of ads expected to be viewed by users during that month.
This seems like a pretty simple situation, but it can be complicated by various technicalities. One complication is in counting page views. For example, by page views we really mean views by a user (not for example by a robot or a search engine spider). Some concepts that are used in calculating an accurate ad inventory include:
– Hit: a request for a file on the site
– Page view: the serving of a web page, which usually includes many files, and therefore many hits
– Session: a unique destination of page views within a certain time period; usually a single IP address that has received some number of page views within 24 hours
Besides distinguishing robots from humans, counting users and ad inventory can be made more accurate by knowing if hits are actually delivered to the browser and viewed, avoiding counting spurious hits such as page refreshes, and mapping users to sessions in light of dynamic IP addresses, etc.
—– Types of ads —–
Ad inventory is characterized by various general attributes, including:
– Premium: the ad will appear on a page which is considered to be valuable beyond the number of users viewing it, e.g. the home page of a portal
– ROS (run of site): the ad will appear on any page within the site; for an ad network this is called RON (run of network)
– ROC (run of category): the ad will appear on any page within a specified category, e.g. business or music
– Targeted: the ad will appear in page views that are targeted by either content or user, e.g. an ad for golf clubs is targeted to pages that have several instances of the word “golf” or users who have expressed an interest in golf
In addition, ads come in various formats, many of which have been standardized. These include:
– Text: a short textual description and a link
– Banner: an image placed horizontally on the page
– Vertical banner: an image placed vertically on the page
– Skyscraper: a vertical banner that is taller than normal
– Interstitial: an ad that loads between two content pages
– Pop-up: an ad that creates a new browser window
– Pop-under: a pop-up that is created behind the active window
– Rich media: an ad using animation or audio/video, such as Flash
—– Ad targeting —–
Ads can be targeted in two main ways: by the content near which the ad appears (content targeting), and by the user who is viewing it (user targeting). These two techniques are part of what is sometimes called relevance marketing (as opposed to mass marketing).
Content targeting has several variants, including:
– Site targeting: targets ads to “vertical” sites that focus on a specific topic or user segment related to the ad
– Category targeting: targets ads to a category within a site (see ROC above)
– Contextual targeting: the text on a given page is analyzed and an algorithm decides which ads best match this text
Unlike content targeting, user targeting depends upon knowing something about the user’s interests. Various methods exist for obtaining user data, thereby gaining the ability to offer user targeted ad space to advertisers:
– Registration: based on data provided by the user, usually in return for premium or personalized content
– Technical targeting: based on data that can be obtained from the user’s HTTP page request, such as domain, ISP, connection speed, operating system, and browser type
– Demographic targeting: based on the user’s demographics such as zip code, age, gender, etc., usually obtained via registration or surveys
– Geo targeting: based on the user’s location, usually obtained via registration or from the IP address
– Behavioral targeting (BT): based on the user’s behavior, e.g. which kinds of pages have been viewed in the recent past
– Search keyword targeting: based on keywords the user provides in a specific search, either on a publisher site or on a search engine
In order to allow advertisers to match ads to user data, users with similar interests are often grouped into user segments or categories.
—– Compensation —–
The advertiser can pay the publisher according to several commonly used measures:
– CPM (cost per thousand): the advertiser pays a fixed amount per thousand impressions, an impression being a user seeing the ad
– CPC (cost per click): the advertiser pays a fixed amount per click, a click being a user clicking on the ad to visit the advertiser’s site
– CPA (cost per action): the advertiser pays a fixed amount per user action; the action can be an inquiry or lead (CPI, CPL), a sale (CPS), or any other kind of specified transaction (CPT)
The latter non-CPM measures are called performance-based, since the advertiser only pays based upon the ad performing, that is, generating an interaction with the user. Publishers often convert performance-based measures into an effective CPM (eCPM) by taking into account the percentage likelihood an impression will yield a click or an action; for clicks, this is called the click through rate (CTR). For example, for a CPC ad, we have:
eCPM = CPC * CTR * 1000.
For a CPA ad, the advertiser must measure the conversion rate, or the percentage likelihood a click will yield an action. If this is denoted CR, we have:
eCPM = CPA * CR * CTR * 1000.
Next up, Part II: Outsourcing ad buying and selling.