The 3 Types of Paid Advertising: What They Are, How They Work, and When to Implement

Paid advertising is any kind of advertising that you have to pay for, unlike “owned” or “earned” advertising. Paid advertising is alive and well on the Internet. In fact, it’s well on its way to becoming the preferred marketing channel for small, medium and large businesses alike. For example, spending on Google AdWords increased 21 percent year over year in Q1 2017.*

With all that increased spending, more options for online paid advertising are becoming increasingly available. This can make new or inexperienced service professional business owners a bit overwhelmed at the sheer amount of options and information available. Luckily, it doesn’t have to be complicated. In fact, when it comes to paid online ads, there are three basic ways an advertiser can choose to reach an audience:

  • Pay-Per-Click, (PPC)
  • Pay-Per-Impression, (PPI) and
  • Display Ads.

Google accounted for 97% of mobile phone traffic in Q1 and 81% of desktop traffic.* Combined with the statistic that 77% of users have admitted to searching something on their phone while sitting in front of a perfectly-abled computer, let’s just say that Google is winning– by a long shot– as the preferred go-to place for all things Internet.

So, for simplicity’s sake, and for the purposes of this post, we will generally be using Google’s terminology for their paid advertising products.

Pay-Per-Click

Pay-Per-Click advertising is one of the best options going. The term pay-per-click is very straightforward. With this kind of advertising, you only pay when a user clicks on your ad. Your ad only shows up when a user searches specific key words that you have associated with your ad. The obvious benefit is that you aren’t stuck paying for a bunch of tire-kickers. You can pay based on a price you set for yourself, or Google uses a real-time automatic bidding system in which you agree to pay Google their recommended bid price any time an ad is clicked.

Here’s an example: Say someone goes to Google.com and types the search term, “Recommended Chicago Dentists” and hits enter. The result is a list of web pages that Google deems related to the search term. For a price, you can choose to be placed at the top of the search results as a sponsor.  Sponsored ads are usually displayed to users on the sides, tops, or bottoms of a result page. You can also opt to go into the Google Ads rotation to be seen on individual websites. You will pay more to have your ads featured on more popular websites.

The best part about PPC is that it is the most measurable and optimizeable marketing channel. Plus, your ads get viewed right when your target audience is searching for the products/services you are selling. PPC is a fast, measurable way to rev up sales for your company.

A word of warning: you can spend a lot of money very quickly on PPC ads if you’re not paying attention. Until you’re comfortable with your Return On Investment (ROI), and that the ad spend is turning into profitable sales, put a daily limit on how much money can be spent paying for clicks.

Pay-Per-Impression

Pay-per-impression (PPI) is a variation on the idea of paying every time someone clicks on your ad. With this setup, you are charged a CPM (cost per thousand) rate. Just as the name implies, there is a flat rate for every one thousand times an ad appears anywhere in the network. The obvious question becomes: Which is best?

In favor of PPI is the fact that you are guaranteed your ad will be shown a certain number of times, and you know the cost beforehand. The obvious downside is that your ad could be shown to potential customers thousands of times and never receive a single click. That’s depressing. The other drawback is that you can’t measure and assess results mid-campaign as with PPC. The campaign must be run in its entirety before you can claim definitive success or failure.

As you might expect, there’s no hard and fast answer. A lot depends upon the industry you’re targeting, the products you’re pitching, and the quality of the ad. Regardless of which advertising method you choose, you should conduct your own tests to figure out what works best to pitch your company’s services.

Display Ads

Display ads, also known as banner ads, are shown to your target audience whenever they are surfing online, but not searching for your product or service. Display ads are a modern version of yesteryear’s drive-by billboards. They are essentially a literal cut and paste from the world of print ads onto the Internet. Display ads can be categorized in the following types:

  • Static images: These are the tried-and-true image ads, usually square or rectangle that appear in various locations around the content.
  • Text: In a reversion to the pre-image internet, studies indicate that clickable text ads within content can be quite effective.
  • Floating banners: These banner-style ads move across the screen or hover above the content.
  • Popup, popover, pop-under: Hated almost universally but acknowledged by advertisers to be universally effective, these are the ‘nuisance’ ads that try their darndest to get you to subscribe to a newsletter, etc.
  • Video: Lately, video or audio ads have become a popular delivery system for display ads.
  • Retargeting: Also called Remarketing, these kinds of ads are a popular subset of Display Ads. If you’ve ever ordered a Jimmy John’s sandwich online, you’ve likely seen their ads popping up whenever you’re out using the interwebs. These are Retargeting ads, reminding you to come back and order another sandwich.

Advertisers like display ads because they are often more affordable than PPC or PPI. Best rates are usually found by contacting the website directly, as rates vary wildly depending upon traffic. As technology improves, so has the ability to target display ads towards whatever demographics you like.

We didn’t cover social media here, but the growing popularity of social media has turned sites such as Facebook and LinkedIn into effective platforms for paid ads. Most social media sites have similar platforms as Google. Then there is the whole YouTube revolution– another topic for another day, but certainly worth a quick mention here.

Conclusion

Effective marketing campaigns capitalize on all channels for advertising: paid, earned, social and more. Although paid advertising costs more than earned advertising, paid forms are an effective way to expose your company’s name to a large audience.

Business owners need to keep in mind that marketing is an art, science, and craft. There are so many variables at work in the mix that you can never neatly categorize your approach entirely. There is no substitute for testing different approaches to find what works best for your situation. If you have never learned the basics of split-testing and optimization, now would be a good time to read up on the topic. Successful online marketing is a continual process of making small changes to an ad in the eternal search for improvement. You’ll quickly learn to drop ads that don’t work and pour your resources into the ones that do.

If you’re feeling overwhelmed by the complexity of the task and underwhelmed by your ability to adequately accomplish it, you’re in luck. We can guide you through any step of the marketing journey. The consultation is free, so give us a ring.

 

* https://searchengineland.com/paid-search-trends-merkle-q1-2017-274043