Do you ever see ads and wonder how they work? In this article we will explain just that! We will be focusing on both Google and Meta Platforms (Facebook & Instagram) as they are some of the most popular sites on the internet and account for around $260 billion in ad spend in the last year.
How do Ads work?
As the headline says, how do ads actually work on these platforms? While the vary slightly in how they work, the general gist is that advertisers target specific audiences to appeal to in the hope that users will engage with the ad in a positive way – this may be following a page, sending a message or visiting a website – to enhance your brand awareness
Cost Per Click – Bring the customers to you
One of the more common ways of advertising, especially for smaller businesses online, Cost Per Click (CPC, or sometimes known as Pay Per Click – PPC) essentially boils down to each time a user clicks on your ad, you pay for that interaction. The amount you pay comes down to the bid – this is how much you are willing to spend per click.
For example, Business A might have an individual click budget of 50p and Business B may have 60p. Therefore, on average, Business B will rank higher as they will spend more for the click. However, Business A may have an overall daily budget of £2, which means they can ultimately bid on other clicks.
The above is an overly simplified explanation of how this works but hopefully gives you an idea.
Cost Per Mille – Appeal to as many people as possible
The more traditional approach, especially when thinking of TV and Radio advertising, is Cost Per Mille (CPM). The is where you look to advertise to as many people as possible – think a TV ad will be shown to a very varied demographic that could contain people with completely different interests. This is generally priced per every 1,000 impressions (views).
For example, a TV show with 10,000 viewers may have a break for adverts where Business A advertises a new phone, the host company charges £1 per 1,000 people meaning that this advert would cost £10.
The general use case for this type of ad is if you wish to spread awareness of your brand to as many people as possible in the hopes that this will create a sense of familiarity as well as repeat business.
Cost Per Action – Pay for actions
Less common but still useful is the Cost Per Action (CPA) model which relates to charging per the actions that are completed. This requires that users are tracked to see them complete an engagement – such as Completing an Order, calling a phone number or filling out an enquiry form.
An example would be a company advertising themselves with a link to a phone number, they would pay based on times that the number is called through the ad.
Conclusion
We hope that this clears up the confusion that is online advertising to make it easier to understand what is going on behind all the flashy ads that you see online! Obviously, this is only scratching the surface of advertising online so if you would like to know more, let us know!
We offer our Digital Advertising services to small businesses who are looking to get their business more prominent in the online space.