Sunday, January 27, 2008

My take on Digital Advertising KPIs

How does a content websites make its revenue? The answer is simple and it's the same concept that magazines, radio and newspapers have adopted which is by selling ads. By selling ads, I mean the source (publisher) website displays banner ads of other target websites/businesses (advertisers) on their website based on an advertising deal which I will focus on specifically. These display banner ads are tied to a campaign that the advertisers would run on their end which can either be sending users to a homepage or sending them to conversion funnel. The advertisers measure the performance of these banners based on 3rd party ad serving tools which in most cases the publisher would also be using to track progress on their end. The aim of the publishing website is to get as many users visiting the website so that the likelihood of it making money increases. The publisher typically gets paid based on primilarily 4 deals listed below:

1) CPC (Cost per Click): This metrics specifies that if a visitor clicks on the banner and lands on the advertiser’s website, the publisher of that ad will get a specific price. More the visitors, more the clicks and eventually more revenue. It is measured as CPC (Cost per Click).

2) CPM (Pay per Thousand Impressions): This deal is primarily based on the volume of traffic landing on the website. The publisher will be paid X amount per 1000 Impressions (Page Views) on the page hosting the Web Banner. The deal can range from 50 cent CPM (Cost per Thousand) to $50 depending on the publishing website.

3) CTR (ClickThrough Rate): This metric captures how many times an ad was clicked compared to how many impression were served. The higher the CTR, the more engaging the media content. This metric is typically calculated along with the website or Mobile app conversion rate which is often used as the final success criteria

4) CPA (Cost per Action/Acquisition): This is my favorite. Based on this deal, the publisher will only be paid if a visitor from its website performed a predefined action like converted into a customer by buying from the advertiser. In this case, the publisher will be paid a portion (0-50%) of the cost of the product.

5) CPV (Cost per Visit):Though this is not a very common metric, through this an advertiser is able pay the publisher based on the number of times visitors have visited the page. (A Visit is a session on a website which occurs within a time frame for the same Unique Visitor. The universal web analytics time frame standard set for Visits is 30 minutes but it can be changed).
I can add one more to this list which is MGR (Monthly Gross Revenue): This is more applicable to online Poker business. According to this deal, the publisher will be paid a share of the monthly gross revenue generated by a Poker player.

These banners can be targeted based on country (I.P.), search terms, source of traffic, day parting (Serving Ads during different time periods) etc which is made possible by tools like DoubleClick etc and can be used by both publishers and advertisers to track banner performance at their end. These tools help both parties to track display banners and manage campaigns like advertising deals and landing traffic.

All in all banners are an integral part of the display advertising business model and they are here to stay. Here's my article on different kinds of banners present in the industry today.

1 comment:

Anonymous said...

I prefer PPC & PPM when I am doing my advertising campaigns.