Internet Advertising Overview
Internet advertising is a straight forward idea that becomes more complicated because of the many ways the advertising is delivered and monetized. Simply stated, internet advertising is paying for placement on an online destination. Just as a hotel or restaurant might choose to “buy a spot” in the Sunday paper or a bridal publication, that same hotel or restaurant could spend that money buying a spot on the internet. As I mentioned, the delivery and payment of these ads can become complicated. To illustrate several different mainstream options I need to step into internet consultant mode for a minute to relay some internet advertising basics.
Internet ads are typically purchased and sold in several different ways: CPM (Cost Per Mille or cost per thousand impressions), CPC (Cost Per Click) and CPA (Cost Per Action). Each of these types of advertisements are commonly used and depending on the type of site, each has varying levels of value. To understand each of these let’s pretend that we’re a hotel and we’re buying ads on three different sites: USA Today (Travel), Google and Expedia.
CPM Based Internet Ads
If we were purchasing ad space on a specific website like USA Today’s Travel section it is likely that they’d want to sell ads based on CPM. As earlier stated, CPM stands for cost per thousand ad views. When a company purchased ads on a CPM basis, they are paying strictly for the privilege of being in front of a given audience. Let’s take a closer look at our USA Today example:
This is a screen shot of USA Today’s Travel section – notice the AAA and CAA advertisement selling Disney vacations. This site is heavily trafficked and attracts many very qualified visitors. I’m willing to bet that AAA and CAA (through their advertising agency) pays on a CPM basis to have that spot. Specifically, they pay for the privilege to be presented a certain number of times on that page, and if they are paying on a CPM basis, they pay regardless of whether anyone clicks the ad or ever buys anything.
The Pros and Cons of CPM Advertising
CPM advertising, when done correctly, reaches a very qualified audience with ads that are usually rich media (animated and flashy). These ads usually occupy a place on the page that is very prominent. Perhaps most important, the graphical nature of these advertisements offer a level of interactivity that no text ads could ever offer. The graphical ads also help when trying to use or build brand equity.
Unlike other online advertising, there are no guarantees with CPM advertising. It is possible, although unlikely, that thousands of people may be presented with that AAA/CAA/Disney ad and never take any action whatsoever. Just because no actions are guaranteed does not mean that the ads are untrackable. Any online ad campaign should always provide the buyer with the number of ad views and the number of ad clicks at the very least.
CPC Advertising
Cost-per-click, or CPC, is another very popular way to buy and sell internet advertising. Although there are many examples of CPC advertising I’d be crazy not to use the king of CPC advertising for this example: Google. Although many people probably already know something about Google and CPC advertising, there is still some confusion about what you purchase from Google, and what shows up as a result of simply being online and indexed by Google. As everyone knows, Google’s main value to the world is that it indexes pretty much all information available online. As a hotel with a website, for example, your company should show up in Google simply as a result of existing online – this is called an organic search listing.
When I searched for “hotel Seattle” as shown in the screen grab below, I got all kinds of information given to me – some CPC ads and other organic listings:
In the areas at the top and to the right (labeled sponsored listings) I am presented with paid CPC ads that Expedia, EdgewaterHotel, Travelocity, SilverCloud and a bunch of others paid for. They joined Google’s Adsense program and bought the right to appear on pages when someone searches for the exact term “hotel Seattle”. They do not pay for their ads unless someone actually click them, and this is how CPC works.
Another thing to be aware of relating to Google’s CPC advertising: your ads don’t just appear on Google’s site, but their whole network. As a webmaster I have signed up to be an Adsense publisher. That ad in the right sidebar of this website is an ad served by Google, and the advertisers you see in that spot paid Google to appear there. If someone clicks it, I get pennies of that click. Just about every site on the web serves these ads… be aware of that when you purchase CPC ads.
The Pros and Cons of CPC Advertising
CPC advertising presents the buyer with very little risk – no one pays for anything unless someone clicks the ad. The assumption is that if someone typed “hotel Seattle” into Google, then clicks on a paid link on that page, they are likely a very qualified visitor.
A major weakness of CPC ads is that they do very little if anything at all to help buyers build their brand. Think of the power in your logo, and then throw it out the window if you’re planning on only using CPC ads. Another weakness of CPC advertising (at least on Google’s own site) is that it completely ignores organic placements that are already in place. Look carefully at the results above. The Edgewater Hotel is paying to sponsor this search term, but they already show up #2 with their organic listings. In essence, they are paying Google for exposure that they already had. In fact, they pay nothing when a visitor clicks their organic listing. Purchasing listings on a search engine is called Search Engine Marketing (SEM) and optimizing organic placements is called Search Engine Optimization (SEO). Both disciplines are important to internet marketing.
CPA Advertising
CPA advertising, unlike CPM and CPC advertising, can take many forms and is harder to neatly sum up. I will, however, attempt to explain CPA advertising in a way that makes sense using Expedia.com as an example:
After getting past the Hotel Sierra Bellevue ad at the top of the content section (which is probably a CPC ad) and ignoring the Hilton ad to the right (which is likely a CPM ad) get to the guts of the Expedia site. CPA advertising means that the publisher puts up an ad, then takes a part of the sale only if and when a sale occurs. The Pan Pacific Seattle link on this page is likely a CPA advertisement. Expedia partnered with this hotel (and many, many others) essentially to sell their hotel rooms for them. Expedia only gets paid when someone actually books a room.
Incidentally, I’m sure Expedia would argue that they aren’t really selling advertising, but are instead a wholesaler selling inventory that would otherwise go unsold (in fact I’m very sure that they’d argue this). This may have been debatable in the early days of Expedia, but truth of the matter is that Expedia has positioned themselves so that many travelers go there first when looking for hotels. Its not just Expedia, but Orbitz, Hotels.com, Travelocity and others who do the same thing.
There are many different examples of CPA advertising, but they are usually small, geographically-specific placements. Another example of CPA advertising could be the towncar service that pays a hotel front desk clerk $10 for each referral that the clerk sends their way.
The Pros and Cons of CPA Advertising
As an advertiser, CPA advertising seems like a best-case scenario. The advertiser takes on no financial risk, and does not pay for a thing unless the ad actually converts into a sale. From the publisher’s standpoint, however, the deal is not so sweet. Unless a given ad is generating sales and the advertiser promptly pays, there is no motivation to push the ads. This lack of incentive to the publisher usually means that higher-quality publishers won’t do CPA deals because their ad space is too valuable to risk.
Additionally, publishers often sign up as many of these types of ads as possible and quickly eliminate the less productive. If your ad doesn’t perform strongly enough it will be yanked off the site without hesitation. Take the front desk clerk towncar example: if another towncar company approaches that desk clerk with the same service, and offers $15 per referral, who do think will get the business?
Summary
Hotels and restaurants have tons of new advertising opportunities. Unfortunately, there are probably just as many scams as good opportunities. Make sure you ask the right questions. If you aren’t sure about something feel free to ask here, and I’ll try to help. Understand, however, that my full-time gig is as a GM for a hotel in the Portland Oregon area. I’ll help where I can!
