Published By Martin Aranovitch

Here's a simple guide to what each of the most common online advertising acronyms mean, and how they can affect your online advertising campaign ...

Online advertising is a popular and affordable way to promote your business online. Using online advertising strategies such as pay per click advertising can help small business owners determine the cost per lead for their business, as it allows you to track sales down to specific units of measurement, such as the advertising keyword itself.

Online advertising is also widely regarded as the most effective direct response medium and is proven to achieve higher response rates than traditional direct mail ad campaigns, for a significant fraction of the cost.

As a business owner or marketer entering the world of online advertising, it's not unusual to get bombarded by all the acronyms that get bandied about, and to think that everyone else seems to know that they mean.  What's even more confusing, is that some acronyms are very similar, and some acronyms have completely different meanings.

Here's a simple guide to what each of the most common acronyms mean, and how they can affect your online advertising campaign:

CPM

One of the first terms used in advertising metric is CPM.  CPM stands for "cost per thousand".

Why, then CPM and not CPT? Well, "M" is the Roman numeral for thousand.  It comes from traditional advertising, where it referred to either the cost to produce a thousand units of something, or the cost to get a thousand people eyeballing your ad. 

In online advertising, CPM means the cost per thousand impressions, or the number of times your ad is viewed.  In the early days of online media planning, this is how most online campaigns were bought and sold.

CPC

CPC stands for cost-per-click, or how much it actually costs to get someone to click on your ad. Essentially, with CPC advertising, you only pay when people click on your ad, hence the name "Pay-Per-Click".

CPA

Another acronym commonly used is CPA, or cost-per-action; it is also sometimes referred to as cost-per-acquisition.   

Calculating Online Advertising Costs

In a CPM campaign, you would have to take the number of impressions you bought and how much it cost, then divide that cost by the number of clicks the campaign accumulated. This would then be your cost-per-click. 

With CPM campaigns, you would also want to find out your CTR, or "clickthrough rate", which you would get by dividing the number of impressions by the number of clicks your ad received. The result is then expressed in a percentage form (e.g. 0.5% CTR).

In a CPM campaign, your CPC was never guaranteed; you would negotiate and pay for a certain amount of impressions, but the advertising provider wouldn't guarantee you any results. 

Marketers then decided to start selling advertising on a CPC basis, meaning you only paid for the ads that got you results.  You could have 10,000 impressions, but you only paid for the 500 clicks you got.  This quickly become the preferred way to buy online advertising.

Now, CPM campaigns are only used in situations where the audience is so targeted that it actually makes financial sense (and is less expensive) to buy CPM rather than CPC.  Because of the targeted nature of the audience, the CTR of the campaign will be much higher than average. Using a tool like AdWords Digger to help maximize your AdWords campaign can help you purchase cost-effective CPM advertising.

Campaigns are not bought on a CPA basis, but it is a useful tool that marketers use to track their bottom line and to relate their online advertising campaign directly back to sales. For example, a marketer may have an advertising budget of $1000.  To be a profitable campaign, he or she decides they must sell 40 of their products, making their CPA $25.  If they sell 50, then their CPA is $20, making the campaign even more profitable.  If he or she only sells 20, their CPA is $50, and they should rethink their advertising strategy.

Let's now try and put those terms into practical use.

For many people who are beginning to market their businesses online, the journey often starts with Google.  Through the Google Adwords program, you can run several different kinds of campaigns; search results, search partners, Google Content, and placement targeting.

Search results are always bought on a CPC basis. You bid on your selected keywords, deciding what your maximum bid would be. You then manage your campaign on an ongoing basis, as the cost for keywords can constantly fluctuate, depending on its popularity. 

Because of the upsurge in CPC advertising in recent years, costs have skyrocketed.

Placement targeting build upon Google Content campaigns, which marketers refer to as AdSense, the name of the program which runs the advertising on these sites. 

As mentioned above, using targeting software such as AdWords Digger makes these campaigns even more effective. It searches and ranks sites based on your criteria, from which you can then pick and choose and import into your AdWords placement targeting list.

You can download AdWords Digger for FREE here:

http://www.portalfeederpro.com/adwordsdigger.html

Knowing what each of the acronyms mean is an important part of learning how to market effectively online. While it may initially seem confusing, knowing these terms and the methodology behind them can only help improve the success of your online advertising campaign.

I hope you have found this article useful and I wish you great success in your future online advertising promotions.

About:

Martin Aranovitch is a successful SME (small to medium enterprise) business coach, sales trainer and web business entrepreneur. Visit his site www.SocialBusinessWeb.com  to download a FREE report on How To Profit With Your Own Social Networking Site .

Source: http://www.portalfeederpro.com

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