Fundamentals of Online Advertising

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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Online advertising has become a crucial part of many companies’ marketing mix. Where once a business could develop an effective reach just by placing an ad in the Yellow Pages, it has become necessary (and easier) to pinpoint specific demographics online with contextual ads, as well as ads placed on sites catering to specific niches.

Compared to traditional print ads, online ads can be dramatically cheaper. Rates can be as low as a few cents per action or impression.

Of course, while you can keep your budget fairly low when using online advertising methods, you can also wind up spending more money than you might have intended. To make sure you get the most bang for your buck, take a close look at a variety of online advertising strategies and get a clear picture of what you have to pay to generate the impact you need.

Evaluate and Test

It is not an entirely uncommon story: someone not particularly familiar with an online advertising tool sets up an account, chooses a few keywords to advertise around and winds up with an unexpected bill for several thousand dollars.

It is perfectly possible to keep your online campaigns under control, however, and avoid such surprises. The key is having detailed information to work with as early in the process as possible and testing the advertising opportunities you identify.

Mikel Schwarz thoroughly tests the online advertising he uses to promote Deo-go and RibbedTee.com. He suggests allocating “a specific amount of money for an online advertising ‘test’ each month. Don't go over that spend...Since you can tell online advertising performance pretty quickly, prepare more than one ad creative, and test.”

But before you even get to the point of testing, you need to narrow your list of potential advertising venues, so you can focus on creating a valuable test. That means vetting advertising opportunities carefully – just as you would if you were working offline. Schwarz uses three specific criteria to do an initial check to determine whether a site is worth advertising on:

1. Check Alexa and Compete ranking/traffic information to see what the historical information shows. Since those sites are not 100 percent accurate, look for trends (going up or going down) and gross traffic values, generally looking for traffic above 20,000 visitors per month as a starting point.
2. Ask the advertising vendor for any click rate or conversion expectations. If they can't provide any, that's a warning sign.
3. Attempt to contact existing advertisers to see how their ads are performing overall.

Determine Your Audience and Reach Them

Don’t be afraid to go looking for ad networks beyond those that you’re already using. While there are a few big players – specifically the major search engines – you can get more targeted results by looking at the ad buys offered by social networks, such as Facebook, and other sites.

Michael Podlesney, owner of Average Person Gardening, along with its Seeds of the Month Club, has tested his advertising mix: 40% to Adwords, 40% to AdRoll and 20% to Facebook. “We have found,” he explains,” that the best results for Facebook advertising occur when you are sending someone directly to your Facebook page. As far as AdWords, we use the pay per click model, using keywords derived from our analytics to drive customers to our seeds club page. We then use AdRoll in what is called “ad retargeting”. If a person visits our Seeds club subscription page and simply leaves, AdRoll will then put our ads on a variety of sites that the person may visit so it keeps our company on the top of their minds.”

Podlesney developed this approach through targeted research.

“For our Adwords,” he says, “we use the keywords from our analytic software that tells us the exact keywords people have used to find us. So we only bid on those keywords. As for the Facebook portion of our advertising we can use our industry data that we collected from various studies from the NGA and the USDA and pinpoint our exact customer demographic. We combine that data with buying data reported by various trade publications and can then narrow down to days of the week and certain times during those days.”

Podlesney’s is a complex process, certainly more complex than anything new advertisers may be ready to develop. But the fundamentals are the same for every advertiser, in print or online: find your audience then find the pitch that brings them to your site.