Ad terminology basics

Posted by on Nov 22, 2012 in Advertising

Online advertising

Ad terminology can be confusing and overwhelming. To help you optimize your campaigns, this post is all about the basics of advertising terminology.

After launching campaigns, it quickly became obvious that I would often have to reference resources to understand advertising. But how do you optimize campaigns without understanding the basics? How do you learn from all the great content on advertising blogs without understanding the terms authors use?

Here are a few great resources that cover ad terminology to get you started:
https://www.facebook.com/help/447834205249495/
http://whatis.techtarget.com/reference/advertising-terminology-on-the-Internet
http://adage.com/article/special-report-audience-buying-guide/ad-age-highly-unofficial-glossary-online-ad-space/149651/

If you want to get a clear idea of the basics, I’d start with this post. I’ll summarize key ad terminology from my perspective and then you can check out other resources to learn even more. I’ll organize the terms into two categories – payment models and performance metrics. For any advertiser, you need to know what you’re paying for and how to measure whether your efforts are worth the cost. This sets you up to monitor and improve your campaigns as you learn more.

Payment Models

PPC – Pay per click is the most common way advertisers pay for ad campaigns. AdWords and BingAds use PPC, and you can also use PPC on Facebook and LinkedIn. Under PPC, you only pay for each click on your ads by setting CPC bids on each network.

PPM – Pay per 1000 impressions. This type of payment is less common, but it is available on Facebook and LinkedIn. PPM works best for companies that already have “stable revenues correlated with traffic” (source: http://www.ebizroi.com/glossary/ – the best explanation I’ve seen on PPM.). With this type of budgeting, the advertiser needs to measure campaign success using CTR and conversion rates.

Performance metrics

Key advertising metrics

Key metrics in the AdStage dashboard

Conversions – There isn’t one definition for a conversion. A conversion can be defined as any action a person takes after seeing an advertisement. For new advertisers, a conversion may just be a click on the advertisement. For more experienced advertisers, conversions may be sign ups or visiting certain pages on your website.

Clicks – Clicks are literally clicks on your ads. Clicks are limited in what they provide to an advertiser alone, but they also tell you whether people are engaging with your ads or not.

Impressions – Impressions are the number of times your ads are displayed to users. Impressions are a raw number. People may see your ads once or many times. Anytime someone sees your ad, it counts toward your impressions.

CTR– Click through rate is the number of clicks divided by the total number of impressions. Clicks give you a general idea about engagement with your ads, but CTR gives you idea about your campaign’s efficiency.

CPC – Cost per click is another simple efficiency metric that tells you how much it’s costing you (on average) each time users engage with your ads.

CPA – Cost per acquisition is the most precise way to measure your campaign’s efficiency. Acquisition tells you about the quality and accuracy of your ads. Lots of acquisitions means that your ads are engaging and your destination URL encourages the user to perform the action that you call an acquisition (or conversion).

Spend – Spend is another simple metric telling you how much you’re spending per network over a chosen time interval. When comparing against on campaigns on the various networks, it is valuable to have an idea about where you devoting most of your ad budget. Ideally, you want to reallocate your budget from high spend, low efficiency campaigns toward low spend, high efficiency campaigns.

Each advertiser follows a slightly different recipe for optimizing campaigns. If you’re interested in tracking metrics and optimizing your campaigns, check out our free dashboard – you can sign up here.

Thanks for reading! If you have any suggestions or comments, please let me know. You can reach me at clark@adstage.io or send us a tweet at @getadstage.

Clark Gates George