Global spending on digital advertising increased to $680 BILLION in 2023, and it’s forecast to continue to increase to $910 billion by 2027. More importantly, digital advertising passed the 50% threshold in total ad spending long ago. It’s here to stay.
Digital advertising’s growth is a result of:
- The fundamental change in the way we consume media.
- The ability to expand the ROI of digital media beyond “the sale” and gather user data, insights, and access.
- The ability to “buy digital” and appear in ‘traditional’ channels including print and broadcast.
- The continued expansion of digital media channels.
I would argue that anyone studying media planning should skip the traditional media and spend 100% of their time on digital. Knowing how to buy programmatic ads on a DSP is MUCH MORE IMPORTANT than knowing how to negotiate prime time upfront ads.
And yet, there are still a lot of “marketers” and clients that look at digital advertising as a dark art. This week’s “For Everyone Else” article sheds light on the basics of digital advertising so marketers can develop strategies that best address their client’s challenges.
The 4 “Personality Types” of Digital Ads
The first thing to understand is WHAT you can buy. As spending has increased and digital advertising has matured, providers have branded their offerings and developed nuances that can confuse many buyers.
Once you sift through the buzz, you’ll find there are just FOUR types of digital advertising:
- Programmatic (aka Display): Commonly called “banner advertising”, this is the type of advertising that most closely resembles traditional advertising. Buyers place an ad, typically an IAB (Interactive Advertising Bureau) compliant unit on a publisher’s digital property. The most effective unit today is the 300 X 250 pixel “medium rectangle.”
- Search (aka AdWords): 89% of US buyers use a search engine to guide their decision-making. As a result, sellers buy placement on search results pages (SERPs) so users see the seller’s ad before the competition. Google dominates search, and as a result, its AdWords offering dominates search advertising.
- Social (aka Facebook): Users across the globe spend more time on social media every day than any other type of online media. Advertisers want to be where the audience is, and they spend their money to get there. Social media advertising started out as “buying followers” but has become a driving force in reaching audiences for both B2B (LinkedIn, Telegram) and B2C (Instagram, Snapchat, Facebook).
- Sponsorship (AKA Influencer): Many think of this as a “new” type of advertising. It’s not. Paying a person or a group for advocacy goes back to the earliest days of trade and certainly has been a part of advertising since the first vendor picked up the tab at a happy hour. The key to success here is knowing who / what you’re buying and being able to quantify the return. Sponsorship is MUCH more than getting a list of members or a mention in a social media post.
The All-Important How
The second key to successful digital advertising is knowing HOW to buy the exposure you want.
Prior to the internet, publishers used data like circulation, viewers, and auto traffic to establish the size of the audience. Advertisers would then pay for the exposure by calculating ad time multiplied by the number of exposures their message “should” receive. Known as cost-per-thousand (CPM), many of the earliest digital advertising buys were based on CPM.
Fortunately, analytics have improved, and users can now buy on other, more meaningful metrics or actions. You can buy digital media by:
- Cost-per-thousand (CPM): This is best used when trying to generate awareness and is often associated with programmatic or sponsorship buys. Brands use CPM advertising to establish a presence on a specific media platform to create awareness for their brand. Return on Investment (ROI) from CPM-based campaigns can be challenging as many of the metrics used are qualitative and measure the audience’s connection to the brand.
- Cost-per-Click (CPC): Most commonly associated with “buying” traffic via search engines or social media, advertisers agree to pay a given rate when a user clicks on their ad. A benefit of a CPC plan is that advertisers get ad impressions without any incremental expense. CPC plans feel simple but there is huge waste and failure since advertisers don’t have a strong understanding of their audience, their interests, and what is needed for conversion. ROI can come in the form of dollar-for-dollar return from a CPC campaign.
- Cost-per-Action (CPA): A purpose-driven advertising model, sometimes mistakenly called “cost-per-acquisition” because of its focus on results. CPA campaigns buy a specific result from the publisher. Useful for social, sponsor and programmatic content, parties negotiate pricing based on the likelihood that a user will perform a specific task. Common tasks include a sale, a sign up or registration, download or software demo. Completing the action is part of the negotiated price which means, ROI is built into these campaigns.
Further Reading on Digital Advertising
If you’d like to dive even deeper into this incredible topic, we’ve got more for you! Check out these great articles that can help you — or help you help others — gain a better understanding of digital advertising:
- LinkedIn Advertising: The Ultimate B2B Audience Builder
- Banner Advertising: Bringing the 19th Century into the 21st
- Search Advertising: How to Be Where Your Audience is Searching
- Sponsorships: Be Somebody, Sell Something
- Coming Soon: Social Advertising: Welcome to Where Everyone Is Hanging Out
One Last Thing … Show me the money
I hope you noticed that ROI is a centerpiece in all digital advertising (and advertising in general) discussions.
If you are going to BUY access to an audience, you must define a KPI (key performance indicator) and evaluate your ROI against it. Technology has given us the means to predict, monitor and achieve specific ROI outcomes.
Like all other business investments, you should have a clear idea of what you’re expecting to get back before you spend a penny.
Ready to get your own digital advertising strategy up and running? You don’t need to go it alone. We’re in this with you. If you need a little help, just drop us a line, anytime.
Rainmaker Digital Services
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