Understand CPM rates, average click through rates, and the best place to advertise on websites to obtain maximum click through rates (CTR’s)

Brand Promotion Vs Interaction costs

Traditionally advertising was used to build brands and marketers considered a high brand recall as a measure to acheive a higher sales return as they assumed that the user preferred their brand (thanks to a better brand positioning ~ brand recall).

Online advertising and Digital Media has brought in a new paradigm of measurability, thanks to the web’s ability to track the clicks (response rates) on the web media advertisements. Web marketers thus face a complex decision: buy online media for branding power (Cost per thousand impressions - CPM) or from a cost per response (CTR) or cost per acquisition which is a sales performance based model.

Although pay per click advertising is becoming increasingly popular, CPM advertising is still an effective way of reaching your online target audience. As an impression is a single instance of an advertisement appearing on a Web site, marketers need to select niche websites for greater success e.g. online share trading portals for mutual funds ads.

Pay per click advertisements on the other hand are mainly the text based ads that appear on search engine result pages are linked with the key words that are inputted on the search engine (and you pay for the clicks that your ad attracts).  However, in recent months Google now offers a pay per click model through placement targeting through their content network.


Let us compare the overall expense of two similar campaigns i.e. CPM Vs CTR: in the pay per click model you pay for each click your ad receives e.g. you are spending $1 for each click; 10 clicks will cost you $10. While in a CPM-based ad.campaign you may be pay $3 for 1,000 impressions. Let’s say your online advertisement receives a click-through ratio of just 1%, you are paying $3 for the same 10 clicks.  Its important to note that 1% is a very high response rate for a cost per impression campaign. This type of response rate is only achieved through relevant placement on specific web pages, plus relevant creative which entices the user to click.

Text CPM ads are starting to become more popular and may be a viable alternative to CTR-based advertising when the new flexible placement options provided by Google. CPM-based advertising may also be more suitable if the desired keywords are very popular and expensive. Instead of paying $5 for a single click (in case of expensive keywords), you could benefit from cheaper ‘1,000 ad impressions’. Unlike traditional advertising there is tremendous scope for differentiation in digital media purchasing that can significantly impact the returns achieved from your online advertising spend.

ROI.com.au’s media usage advice

At ROI.com.au, we believe that the decision to choose between CPM or CTR needs to be considered from both a branding and cost per customer acquisition perspective.

Given the measurability of online advertising, both brand & response centric marketers look at online ad spend in a strictly action driven, promotional context. From this tactical perspective marketers use online advertising budgets to generate leads / customer actions that also results in brand promotion

Experts at ROI.com.au have found that a hybrid CPM and CTR media model delivers the best results by building brand and boosting the purchase intent of the web user by using ad copy and placements creatively. CPM and CTR are complementary advertising buys that fill different needs. Typically, blue-chip advertisers ROI.com.au works with almost always prefer CPM based campaigns while smaller /lesser known companies in the same categories generally want to run CTR based campaigns.

Here’s are some questions you should answer prior to developing your own online advertising strategy with the appropriate CPM and pay per click mix

• How do your target customers use the internet? How does this relate to your services/product offerings? How do these fit into your overall marketing strategy?
• What are your marketing / advertising goals? Do you have to improve branding to drive immediate response, build the purchase intent, or both? How will the web get you where your business needs to be?
• How does your advertisement's viewing environment influence branding and the purchase intent? Can your web-media buy scale? Broadly assess content, editorial direction, target audience, and other advertisers (‘brand ecology’ ).
• How does the creative (copy & design), media format and landing pages, relate to target customer needs & your marketing strategy?

The difference between CPM and pay per click  buys depends on who bears the risk for converting an ad impression into a sale / acquisition. When online publishers sell media on a CPM basis, they do know how many page views are required to fulfill their obligation. When they sell media on a pay per click basis, they do not know in advance how many webpage views are needed for a successful action / conversion.

Many factors that affect the desired yield (landing pages and sales processes) are beyond their control. CTR-placement media sellers generally charge a premium to accept the risk of a cost per acquisition online advertising model.

Thus by using  pay per click or cost per acquisition only deals you can limit your ad options and potential brand universe.

Always consider:

• Which websites efficiently contribute to your reach marketing goals? Do they deliver good quality customers?
• How does the media context interact with your advertisements? Is your advertising integrated with content? Does this environment help increase the desired purchase intent? Does the ad content complement your product (health for health products)? Should you develop / test new creative approaches?
• Is the media decision cost effective in light of your strategic business goals and immediate/urgent need (sales promotion to liquidate unsold inventory)?
•Can your ad campaign's effectiveness be increased by optimising factors like content, format, landing pages, and ad placement, for better conversion rates at lower acquisition costs? You could run different tests to determine which works best for your business.
 
You should ideally pay more to advertise where your ad receives more attention and does not suffer from viewer fatigue. As a result, fewer impressions are needed to acquire better-performing customers.

The team at ROI.com.au wishes your business every online success in developing and implementing a successful digital media strategy… and if you