Meeting Your ROI Objectives

Posted on by Chief Marketer Staff

The wide range of payment models used for online advertising often causes a tremendous amount of confusion for advertisers trying to determine their return on investment.

Understanding how to design an advertising program to optimize each online format is the key to hitting your ROI objectives.The first step is to understand how a Web publisher (like Yahoo!, AOL or MSN) thinks. A publisher’s goal is to get the most revenue they can from each page displayed. Publishers would prefer to sell their entire inventory at their target effective CPM (cost per thousand views), thereby guaranteeing their profit margin.

Some publishers have begun to realize that they might actually make more money off a CPA (cost per action/acquisition) program if it performed well for the client. This thinking has actually been automated into the bidding model for Google’s AdWords. On most cost-per-click (CPC) search engines, the highest bidder gets the top spot, and so on down. With Google’s new model, the highest spot goes to the advertiser driving the most revenue for Google. This is determined by a combination of the CPC bid and the clickthrough rate. So if company A bids $1 and Company B bids $1.50, but the ad for Company A gets double the click rate, Company A gets the top spot. Other major publishers are starting to test this concept with run-of-site banners. In this model clients bid for the inventory, with the impressions going to the advertisers generating the highest effective CPM, no matter what format they prefer to pay for it.

For advertisers it’s important to get the most value out of a campaign by developing creative to complement the format. If media is purchased on a CPM or fixed-rate basis, the objective is to drive as many visitors as possible to the site. The advertiser has already agreed to pay for the eyeballs, so the creative should be focused on driving maximum traffic. On the opposite side of the spectrum, if media is purchased on a CPC basis, creative that attracts hundreds of thousands clicks but only a handful of sales could be disastrous. The ads need to limit clicks by

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