What is Paid Advertising?
Paid advertising is online advertising in which advertisers bid in real-time auctions to have their ads appear in specific slots on a platform or network. For example, in the below search for laptops, you can see shopping and text advertisements both.
It is also known as biddable media or pay-per-click (PPC) advertising, which means you pay each time a person clicks on your advertisements.
This model is typically in contrast to earned or owned advertising, in which you can use a platform to distribute your content for free, such as Facebook or LinkedIn posts.
In an ideal world, your business timeline would be as follows: establish a company > establish a website/blog/social network > gain dozens of followers > brand becomes popular > profit. Sadly, things are never that simple, and optimising your conversion channels takes significant time and effort.
Yes, there are tales of people who started their businesses and emerged as new big players in their niche in less than six months. However, bear in mind such scenarios are exceptions rather than a rule.
This blog will explain how you can use paid advertising to attract and convert customers. But keep in mind that paid advertising cannot be a replacement for SEO or quality content.
The Process of Paid Advertising: How it Works?
Paid digital advertising is a marketing strategy in which businesses pay a publisher (such as a search engine or website owner) every time a person clicks or views their advertisement on a search result page, on a website, social media, or other digital platforms.
You can essentially buy attention with this approach, as opposed to the strategy of earning it organically.
When does the bidding for an ad begin?
Consider a digital auction room, with different companies making a bid for their ad to appear in a specific space.
The bidding may become slightly costly before getting sold in a competitive market. Or, if the companies decide that the space isn’t worth their time, the bids may remain extremely low.
When all the bids are submitted, the auctioneer awards the best ones with the best prizes, which are the best web pages and ads (high online visibility).
The auctioneer (publisher) is now providing the most relevant and up-voted content to their users (or searchers) because they are promoting the best stuff.
That is how the internet monetised ads and it is still how many ad platforms sell ad space today. The most effective advertisements get the most exposure.
Rather than conducting a blind auction, most platforms provide a lot of transparency around the highest bids, which could help you decide whether or not you want to compete for a specific ad placement.
If you decide to place a bid and perfect the creative, copy, and audience targeting to create a high-performing ad, these ad platforms will reward your efforts with increased visibility.
And, yes, paid advertising can significantly impact many organisations.
Clicks vs. impressions
Platforms charge in two ways for displaying your ads.
One is for visibility or impressions. The cost structure is unaffected by whether or not an individual acts on your advertisement. When ad placement pricing is concerned, the size of their audience is the most critical factor to consider.
The other option is to pay based on the action: if a user clicks on your ad, you pay the cost per click or the price decided by the auctioneer with the other bidders in mind. Consequently, the terms pay-per-click (PPC) and cost-per-click (CPC) emerged.
- Impressions imply that you are paying for visibility
- Pay-per-click means that you are paying for engagement
CPM (impression) channels are typically more concerned with raising awareness or increasing views (display ads, OTT, programmatic advertising, etc.).
On the other hand, CPC channels are more concerned with driving more intent-based traffic (Google ads or Facebook campaigns). These days you can buy ads on cost-per-lead (CPL) and cost-per-acquisition (CPA) as well.
CPL is a popular metric for assessing the effectiveness of a marketing campaign. CPL is the amount you pay to acquire a new lead. CPL is the amount of money that your company must invest to generate a single lead.
The CPA metric is similar to the cost per lead (CPL), but it applies to leads further down the funnel. The total cost of acquiring a new customer through a specific channel or campaign is defined as this metric. This metric is typically linked to your total media spend on a specific campaign.
Should you focus solely on PPC and overlook impressions?
Just because a digital ad platform or publisher charges you by impressions does not mean it will not elicit actions (clicks, downloads, visits, etc.). The main disadvantage is that you are not guaranteed a return on your investment.
The benefits and drawbacks of impressions and visibility-based pricing
Assume you invest Rs 20,000 in a campaign that only charges for impressions received. For example, you invest in running a video advertisement on a streaming platform. The entire amount will be gone, and you may notice an increase in business. You could even include a promotional code and directly attribute some sales to those who saw that specific video ad.
And if it’s an effective channel that your audience enjoys, and the only pricing model available is impressions, it’s probably still worthwhile to advertise there.
The disadvantage is that you may spend the entire Rs 20,000 on that ad and see no change in revenue. Unfortunately, it makes no difference. You received the impressions you paid for but no leads.
The benefits and drawbacks of pay-per-click and action-based pricing
Let’s say you spend the same Rs 20,000 on running a Google Ads campaign instead. The advantage is that whatever portion of your budget you allocate goes towards the action – people who were interested in your ad and decided to click on it.
The disadvantage of PPC is that you only pay for each click. For example, you may decide to run a search-based campaign with a Rs 20,000 budget, but due to a lack of search traffic for the terms you select, only 20 people will click on your ad for Rs 20 each.
Therefore you only got 20 leads by spending Rs 200 on your campaign, despite expecting a flood of qualified leads.
The importance of targeting the right audience
Getting your audience parameters correct is just as important – if not more so – than creating the perfect ad.
Digital platforms have a variety of methods for segmenting audiences based on factors such as:
- Demographic information (age, income, geography, family size, and so on),
- Psychographic information (values, motivations, and affinities),
- Subscriptions,
- Purchase history,
- Online behaviour, and more.
It’s a long list growing longer as we spend more time interacting, engaging, purchasing, and sharing on devices and online platforms. The possibilities for dialling in the right audience for your message expand as the list grows – and so does the effort required to get it right.
Also Read: An Ultimate Guide to Search Engine Optimisation (SEO) Basics in 2023
Types of Paid Advertising
There are various types of paid advertising. Marketers can select those they believe will work wonders for their product or service.
Below are some of the most important ones that businesses and brands are employing to achieve the best results and benefits:
1. Search ads
Search advertising, also known as paid search advertising or search engine marketing, is a marketing strategy that entails inserting digital advertisements within search engine results.
Businesses that operate search advertising campaigns pay a modest fee each time someone clicks on one of their ads. The ability to bid on keywords so that ads appear when people search for a specific product or service is a powerful tool for today’s business advertisers.
2. Social media ads
Social media advertising is a type of digital marketing in which your target audience is shown paid ads via social networking sites like Facebook, Twitter, and Instagram.
Social media ads are a quick and efficient way to communicate with your customers and increase the effectiveness of your marketing campaigns.
By leveraging different data sources, advertisers can hyper-target their audiences and deliver personalised content based on their demographics and behaviour.
Brands might see more interactions and conversions when an audience is informed about a brand via social media. Social media ads are also relatively inexpensive, with the potential for high rates of return.
3. Display ads
Display ads are image and video advertisements displayed to users while they browse websites, social media, apps, and, more recently, connected TV devices.
Broadly, they are defined as any digital ad format other than paid search and audio-only ads.
Marketers use display ads to promote brand recognition, particular products, promotional sales, mobile applications, content, or services throughout the buyer’s journey. Display ads can be static, animated, or based on a video.
These ads are commonly associated with top-of-funnel marketing, in which making a person aware of your brand is critical.
4. Google shopping ads
Google Shopping is a product comparison service integrated into Google’s search engine. In Google Shopping, eCommerce retailers visually advertise products on the search engine and provide details about each product to help customers to convert more quickly and reliably.
Google Shopping provides an automated advertising platform for online retailers to promote their products directly to consumers with high purchase intent when they search for products on Google.
When a customer searches for a product, Google Shopping ads appear in Google search. Google will display the products that are most relevant to the search term. Every time a potential buyer clicks on the ad, the advertisers’ product page is displayed.
5. Retargeting ads
There are several approaches to retargeting. It most commonly refers to online ad placement or display ads that target users who have engaged with your website in unique situations without making a purchase.
A cookie is placed in a visitor’s browser when they enter your website, click on a product, or perform a specific action that you want them to perform. After they leave your site, you can use this information to retarget them with ads based on their interactions.
External parties, such as the Display Network from Google or Facebook, place these ads. They enable your ads to be displayed on other websites visited by your visitors.
6. Remarketing ads
Here things get a little confusing as retargeting is also known as remarketing at times (even though it is remarketing). Google’s Remarketing Tools are an example of this. They are all traditional retargeting tools.
While this may seem perplexing, remarketing and retargeting have similar goals, and the terminology isn’t as important as the associated strategy. With that said, remarketing is more often than not about re-engaging customers through emails.
Retargeting is the process of guiding potential customers down the purchase path. Traditional examples of remarketing include emailing a customer to renew a service or upsell an accessory. It may also include a brand reminding users to act based on their purchasing history.
It is common in email marketing but can also take the form of paid ads targeted at current customer buckets.
7. Native ads
Native ads are frequently featured on websites as recommended content, showing up below or next to an article you just read. They also show up as in-feed ads in social media news feed such as Facebook or Twitter.
Search and promoted listings, which show up at the top of Google search results or in the sidebar, are another form of native advertising.
Types of native ads:
- In-feed ads: Ads that appear in your social media news feed (i.e., Facebook or Twitter feed)
- Search and promoted listings: These are advertisements that show up at the top of your Google search results or in the sidebar.
- Content recommendations: Articles recommended to you after the article you just read.
8. Video ads
Video advertising is a marketing strategy that involves producing a brief and informative video that endorses a product and is played before, during, or after the main video.
It aids in telling a story, increasing sales volume, creating buzz, communicating information succinctly and captivatingly, and reaching a larger audience. Video advertising is a powerful marketing strategy that can help brands improve their bottom line.
Marketers acknowledge that promotional videos help them raise awareness, interact with their target audience, and establish trust with potential customers.
9. Podcast ads
A form of programmatic audio is podcast advertising. Programmatic audio is a relatively new advertising format that places advertisements within audio content such as online radio, music streaming apps, and podcasts.
Marketers can target these placements via private marketplace or open marketplace deals to place their advertisements in audio content.
Podcast ads are audio advertisements promoted within a podcast. There are several types of podcast advertisements, including:
- Host-read advertisements: These are pre-recorded or read live by the podcast host before, during, or after the podcast.
- Direct-sold audio ads: These are instances in which the host collaborates directly with a marketer to add a pre-recorded ad into the podcast, either manually or through dynamic insertion at the time of download.
- Programmatic ads: These audio ads are dynamically inserted and served through an ad network. There is no direct connection to the podcaster.
- Sponsored/branded podcasts: When a brand sponsors or creates a podcast to promote itself.
Also Read: The Ultimate Guide to Social Media Marketing (SMM) in 2023
How to Launch Successful Paid Advertising Campaigns?
There is only one way to master digital advertising. That is, to do it yourself. To run your campaigns. To make a mistake. And to learn from your errors. Sorry! You can’t slack off on this one.
Experience, as with any digital marketing channel, trumps theory. The challenge is that to gain experience, you must spend money on campaigns; however, companies with paid campaign budgets prefer to hire experienced professionals.
Mistakes can be costly. The problem is that digital advertising is all about trial and error. Even the most seasoned digital advertisers will typically lose money on their first attempt and then later adjust until they reach profitability.
The difference between someone with experience and someone without is how quickly they can make their campaigns profitable. Beginners are usually discouraged or panicked before they reach that point. If you’re just getting started, start small and use a repeatable, proven framework to launch profitable campaigns.
- Understanding the advertising platforms
- Planning campaigns for each stage of the funnel
- Targeting the correct audiences for every campaign
- Creating high-converting ads
- Estimating your campaign’s budget
Let’s go over each of these now:
1. Understanding the advertising platforms
Although you can put ads on Twitter, LinkedIn, Quora, Snapchat, Amazon, Tinder, and many other platforms, most digital marketers concentrate on just two: Google and Facebook. As a result, they control 58% of the total digital ad market. There are several reasons for this:
- They have the most viewers.
- They have the most effective targeting capabilities.
- They’ve built the most robust advertising features into their platforms.
They do, however, work in fundamentally different ways.
Google is intent-driven
Google provides advertisers with numerous ways to target and display their advertising, but search ads remain the most popular. These are the ones at the top of the search results. In this case, advertisers “bid” on specific keywords (i.e., phrases people search) to have their ads appear in the search results.
It is a simple but effective concept. People who search for a term are interested in that term at that particular time. It provides the advertisers with an excellent opportunity to place your product or message in front of those individuals.
Consider how different that is from TV advertising, where you are interrupted by an ad during a commercial break in your favourite show. Traditional ads rely on interruptions, whereas search ads rely on intent.
Facebook is interest-driven
Facebook, on the other hand, employs a different strategy. They’ve amassed a massive amount of information about each user, including what they like, who they know, where they’ve been, what they’re interested in, and even what they do on websites other than Facebook.
They might not understand what you’re looking for right now. They can, however, triangulate your demographic and psychographic data and make an educated guess about what you might be interested in.
It’s a little unsettling. However, it is effective as an advertiser. Facebook uses this information to serve highly relevant ads to its users. It is also very different from traditional advertising.
With TV ads, you broadcast them to a large audience in hopes that some of them will be interested in your product. With Facebook Ads, you carefully select the people who are most likely to be interested in your product based on a wealth of data.
As a result, Facebook ads are based on interests. Now I’ll show you how to strategically use Google Ads and Facebook Ads to generate results for your business.
2. Planning campaigns for each stage of the funnel
When just starting, do not make the mistake of believing that simply creating an ad that takes users to a sales page will generate sales. Many people make this error. If you do this, you will miss out on potential growth in digital advertising.
A better approach is to design your digital advertising strategy in such a way that it benefits your entire funnel. As a digital advertiser, your job will be to create campaigns that meet the objectives for each stage of the funnel:
- Top-of-the-funnel: Attract targeted traffic
- Middle-of-the-funnel: Generate more leads
- Bottom-of-the-funnel: Generate more sales
- Monetisation, retention, and love: Boost customer lifetime value, decrease churn and get referrals
You can easily optimise targeting, campaign budget, messaging, and even the advertising platforms you use for each sales funnel stage by launching campaigns with these simple yet clear goals.
3. Targeting the correct audiences for every campaign
Targeting is, more than creating your ads, the most critical step in starting an advertising campaign. Only when you put your campaigns in front of the correct audience you be able to see the results.
After you’ve created campaigns for each stage of the funnel, it’s time to start thinking about targeting. At the most basic level, your campaigns can be targeted in two ways:
Prospecting involves targeting entirely new audiences for your campaigns – people who aren’t on your email list or have never visited your website.
Remarketing involves targeting people who have previously interacted with your company, such as those who have visited your website or joined your mailing list. Each has its own set of advantages.
Prospecting enables you to reach people who would never have heard of you otherwise. Remarketing is an excellent method for converting people already in your funnel.
Prospecting is generally better suited to top or middle-of-the-funnel campaigns, whereas remarketing is ideal for the middle, bottom, and monetization stages of the funnel. As previously stated, targeting works differently on different platforms.
4. Creating high-converting ads
Earlier, you had to pay a lot of money to major ad agencies to create great ads. However, anyone can launch world-class ad campaigns using digital advertising. The main reason is that digital ads are subject to far more restrictions than traditional TV or magazine advertisements, and everyone must work within the same parameters.
Following a few best practices will provide you with a solid foundation from which to build.
- Familiarise yourself with the ad formats: Understanding how to use the real estate offered by advertising platforms is the initial step in creating great ads. You should understand the elements of each type of ad and use them all when constructing your ads.
- Writing conversion-focused copy: One of the most important optimisations you can make is to write conversion-focused copy. Because you only have limited space to convey your message, you must make each word count.
- Have a clear call-to-action: The most powerful thing you can do in digital advertising to persuade people to do something is to tell them to do it.
- Include eye-catching visuals: Some ad platforms allow you to include ad creatives, which are visuals in your ads. These creatives help to highlight the product’s quality or to inspire the audience.
- Check that your landing pages correspond to your ads: Lastly, the page your audience arrives at after clicking on your ads (known as the landing page) must correspond to what was advertised.
5. Estimating your campaign’s budget
There would be no place for the little guys if digital advertising worked the same way as traditional advertising. Small businesses would find it difficult to compete with large corporations and their multibillion-dollar budgets. Thankfully, that is not how digital advertising works!
Digital advertising platforms employ an auction model and have devised a method of levelling the playing field. They accomplished this by incorporating quality and relevance into the auction. The name of this metric varies depending on the platform, but the principle is the same. It is known as Quality Score in Google Ads and Relevance Score in Facebook Ads.
In essence, it works as follows:
- You (the advertiser) decide how much you want to spend for every click on your ads.
- The ad platform examines your bid, targeting, advertisement, and landing page.
- The ad platform compares your data to that of other bidders.
- The ad platform selects which ads to display based on the best combination of bid and audience relevance.
- The ad platform monitors ad performance and adjusts based on engagement metrics (e.g., clicks, CTR, bounce rate).
It means that you don’t have to be the highest bidder. You can outperform even the world’s largest corporations if your advertisements are relevant and engaging.
6. Keep track of and adjust paid advertising campaigns
Keep an eye on the performance of your campaigns and track key metrics such as click-through rates, conversion rates, and cost-per-conversion. Use this data to fine-tune and optimise your campaigns for the best results. You should also take the following two approaches for better results:
- Test and experiment: Use A/B testing to test different copy, visuals, targeting options, and landing pages. Continuously experiment and test new ideas to identify the best-performing strategies.
- Keep abreast of industry developments: Paid advertising is an ever-changing landscape, so keep up with the latest trends, updates, and best practices. Join relevant communities, attend industry events, and read blogs and publications to stay informed.
By following these tips, you can optimise your paid advertising campaigns and achieve the best possible results for your business.
Also Read: The Ultimate Guide to Web Analytics in 2023
How to Measure the Success of Your Paid Advertising Campaigns?
Let’s get into some numbers. While some digital advertising metrics may have slightly different names or definitions across platforms, the core ones remain consistent. If you’re new to advertising, here are the most important ones to know right now:
1. Cost-Per-Click (CPC)
The most basic digital advertising metric is cost-per-click. CPC, as the name implies, represents the amount you, the advertiser, must pay each time an ad is clicked.
The CPC value can be used to estimate campaign budgets or to determine whether or not campaigns are profitable. Furthermore, you can analyse CPC variations to determine whether something in your campaigns needs to be optimised (or if a previous optimisation worked).
2. Click-Through-Rate (CTR)
The click-through rate is the proportion of people who click on your ads compared to the total number of people who saw them. It is an indication of how relevant your ads are:
A high click-through rate indicates that your audience is engaging with your campaign. A low click-through rate may imply that your targeting or messaging needs to be adjusted. If you are testing different ad variations, you can use CTR to see which generates the most clicks.
3. Relevance Score (RS) / Quality Score (QS)
The business models of Google and Facebook rely on showing only the most relevant content to their users—it’s a competitive advantage.
Because both Google and Facebook have instated guidelines and rules that compel advertisers to display relevant content to their users, ads haven’t (completely) ruined their user experiences. Google developed the Quality Score (QS), while Facebook developed the Relevance Score.
Outside of Google and Facebook, no one knows how these metrics are calculated but the principles are the same:
- The relevance of the ad copy affects the score. A higher score will result from highly relevant content.
- The score is influenced by how well users interact with the advertisement. A high level of engagement with the ad will result in a higher score.
- User engagement with the landing page is critical for the score. A high level of engagement with the landing page will result in a higher score.
Advertising platforms use these scores to determine how frequently your ads are shown, how many people see them, and how much you’ll pay for each click.
4. Cost-Per-Lead (CPL) / Cost-Per-Acquired-Customer (CAC)
As you may have guessed, paid advertising is a game of profit. You must acquire traffic, leads, and consumers at a lower cost than your revenue. As long as you can do that, you can scale your profits by increasing your ad spending. That is why the cost of paid advertising is such an important metric.
In addition to CPC, the two primary cost-related metrics are cost-per-lead (CPL) and cost-per-acquired-customer (CPC). CPL is the average amount an advertiser must spend to obtain a single lead. CAC, in contrast, is the average amount an advertiser must spend to acquire a single customer.
These metrics can be used to calculate profitability or budget.
Paid Advertising: Frequently Asked Questions
Q1. How paid and organic searches work together?
Paid search ads and organic search optimisation don’t have to be diametrically opposed. Using both can yield incredible results. This is because of the fact that paid and organic search have rather different strengths. While organic SEO produces long-term outcomes and high-quality traffic, paid search ads are indisputably more effective at generating traffic right now.
So, if you’re unsure whether to go with paid or organic, understand that you don’t have to. Rather, embrace the unique attributes of each to benefit your brand the most.
Q2. Do paid ads actually work?
Yes, absolutely. You’ll start getting more clicks soon after your campaign goes live once you create an eye-catching ad, bid competitively, and wisely choose your targeting parameters.
In other words, while paid advertising can drive results, it cannot compensate for poor content or an absence of organic traffic. If you want to see long-term growth, you’ll need to have a fantastic content strategy as well as stellar SEO.
On a Concluding Note
While organic marketing and SEO will help you reach people, they are unlikely to help you reach your ideal target customer. Remember, you’re up against every major corporation in your industry. Using paid ads along with these efforts will strengthen your market position, raise brand awareness, and place your company in front of the right customers.
You can discover more about paid advertising or digital marketing by reading our knowledge base blogs and applying what you’ve learned to your business.
