Introduction to Advertising

This article describes Internet advertising terminology and technology and discusses paid advertisements. We have several other articles that explain aspects of Internet advertising:

• For information about laws governing Internet advertising, see our article "Privacy Policies and Internet Advertising Law."
• For search engine advertising, see our article "How to Run Paid Search Engine Campaigns."
• For free advertising techniques, see our article " 20 Free Ways to Advertise Your Web Site."

Since the first ad appeared on HotWired's Web site in 1994, the Internet has become a key component of most businesses' advertising campaigns. According to DoubleClick, in 2004 $9.6 billion was spent on Internet advertising, which "is larger than the whole outdoor advertising industry, about 80% of the size of the magazine ad industry and half the size of the radio ad sector."

The Internet offers an increasing number of opportunities for small businesses to advertise their products and services. Internet advertisements can take many forms, from the now ubiquitous banner ads and pop-up ads, to search engine ads, e-mail ads, discussion forums, blogs, newsletters, and streaming audio and video. Ad sizes have been standardized; following are the most popular:

• Banner: a horizontal ad (468 x 60 pixels) that usually appears across the top of a Web page.
• Leaderboard: a horizontal ad (728 x 90) that usually appears across the top of a Web page.
• Skyscraper: a vertical ad (120 x 600 and 160 x 600) that often appears in its own column, next to the main content on the Web page.
• Interstitial: a rectangular or square ad (550 x 480 and 250 x 250) that appears within the text and content of the Web page.

Although rich content ads such as streaming video are now common, the humble banner ad is still the most commonly seen. The second-most common ad is the leaderboard. This is good news for small businesses, because banner and leaderboard ads are much less expensive to produce than rich content ads. For in-depth research on the effectiveness of various types of Internet ads, go to DoubleClick at www.doubleclick.com and visit their Knowledge Central.

Metrics

Businesses are spending less money on traditional forms of advertising, such as retail displays, and an increasing amount on Internet advertising. One reason for this trend is that Internet ads can provide more detailed customer information than display ads and traditional print media. There are many metrics evolved in evaluating your Internet campaigns. Following are the most important:

• Click-through: The occurrence of a single consumer clicking on your ad to obtain more information.
• Click-through rate (CTR): A percentage that represents the number of click-throughs per one hundred ad impressions.
• Conversion rate: A percentage that represents how many consumers ultimately followed the advertisements call-to-action. If your ad was selling cameras, this is the percentage of people who bought a camera after seeing the ad.
• Cost-per-thousand impressions (CPM): The cost of buying one thousand impressions.
• Hit: An often misunderstood metric. A hit occurs when a Web server requests that a file be displayed as part of a Web site; however, a hit on a file (your ad, for instance) does not necessarily mean that the consumer saw it.
• Impression: A single occurrence of an advertisement being displayed.
• Page view: A page view occurs when a Web server requests that a Web page be displayed. See also hit.
• Stickiness: A measure of how involved each customer is with your site; stickiness can be measured in amount of time spent on your site, or the number of Web pages viewed.
• Traffic: The general level of activity on your Web site; how many pages are being viewed by how many unique visitors.
• Unique visitors: The number of individual consumers who visit your Web site during a certain timeframe.
• View-through: Measures the percentage of consumers who visit a business' Web site within a specific time frame after seeing an ad for that business. In this case, consumers do not actually click on the ad but are still influenced by it.

Cookies, Web Beacons, and Other Customer-Tracking Technologies

This section discusses the Internet advertising technologies used to collect consumer information. Popular technologies include:

• Cookies: A text file that is used to track a consumer's preferences and behavior as they use various Web sites. Session cookies are files you store on your Web site that only collect information about a customer while they are on your site. These cookies primarily collect non-PII but can also collect data that falls into a grey area, such as the customer's IP address. Persistent cookies are files that are stored on the consumer's computer; these cookies can collect a wide range of PII and non-PII, including all the Web sites a customer visits and personal data they provide on other sites.
• Web beacons (aka Web bugs, action tags, pixel tags, clear GIFs, and invisible GIFs): A small graphic--typically only one pixel in size--embedded in your Web page or an HTML-based e-mail message. Web beacons gather customer behavior information and work with cookies to transmit that information to any third-party you choose.
• Server log files: Your own Web server log files are a rich source of customer information. To fully utilize these files, you will need a Web traffic reporting tool such as Urchin, the tool Verio supplies to its small business customers.

Working with Network Advertisers

Network advertisers are companies that distribute online advertisements. You pay them to place your ads on other Web sites. Likewise, a network advertiser will pay you for allowing other companies to place their ads on your Web site. Some network advertisers specialize in placing banner ads, and other types of graphical, multimedia ads, on Web site pages. Others specialize in placing ads in e-mail newsletters.

Network advertisers have three primary systems for charging fees:

• Cost per impression (CPM): A fee based on how many times your ad is displayed on another Web site. The lowest increment is 1,000 impressions. This is usually the least expensive way to purchase ads, but it is also the least valuable because it is not necessarily a measure of how many people actually looked at your ad.
• Pay per click: A fee based on how many people actually click on your ad. This is more expensive than CPM but also more valuable because you are only paying for customers who actually saw your ad and clicked on it for more information.
• Pay per action: A fee based solely on the customer taking a specific action, such as purchasing the product in the ad. This is the ultimate measure of your ad's success.

Network advertisers such as DoubleClick and 24/7 Real Media tend to serve larger businesses, while companies like Atlas and BehaviorLink have more products aimed at smaller businesses.

Because most network advertisers collect information about customers who visit your site, it is important to mention these advertisers in your company's privacy policy (see our article "Privacy Policies and Internet Advertising Law" for more information. In an effort to reassure consumers and self-monitor the industry, many network advertisers have joined the Network Advertising Initiative (NAI) at www.networkadvertising.org. NAI members promote business and Internet advertising while following strict guidelines for handling consumer data.