Digital Advertising – Simplified

Albert Einstein once said “if you can’t explain it simply, you don’t understand it well enough.”  Of course, he was right.  And, that truth is clearly evindent in the world of digital advertising.  As someone who lives and works at the intersection of advertising and digital, I regularly get asked by friends and associates for an overview of how they can begin capturing the power of digital advertising to advance their business.  This post is my attempt to simply and clearly explain the basics of digital advertising.

While it is true that the digital advertising world can be very complex.    I think it can also be simplified by understanding the where, the why, and the how.  I believe we can simplify the vast universe of digital marketing down to three basic buckets: search, image, and social.  I’ll provide a brief overview of each basic type of digital advertising below – addressing Where these ads show up, Why they show up, and How they are paid for.

Search Advertising

Where is this used?

Search Engine Advertising shows up at the top of a search result page.  These results are marked with a small AD image beside the URL. Any time a search is performed Search Ads appear at the top of the page.  The value with search ads is the theory that I can instantly appear in the first or second spot on Google for any keyword – as long as I am willing to pay for it.  I can test keywords to find out which ones perform well.  I can even advertise on competitor’s keywords – Ford purchasing the top spot for the keyword Chevy.  All of this is possible as long as I am willing to pay for it!

Why do they show up?

Search ads, in their base form, are simple to understand.  They show up for one reason – because a specific keyword was searched for.  As a business owner, I can choose to advertise on the keyword “House Paint”.  As long as I am willing to pay for it, my ad will show up whenever anybody types in the keyword “house paint.”  Advertisers simply choose which keywords they believe are valuable, set up a budget (see below for how these ads are paid for), and the ads will show up.  Ads can be limited to certain geographic areas – cities, states, distance from a specific point, etc.

But, in their basic form, search ads show up for one single reason – becuase a business owner was wiling to pay for the keyword I just typed into Google.  That’s it.

How are these ads paid for?

Search ads are paid for on a Pay Per Click basis.  What does this mean?  It means that technically ads show up for FREE.  That’s right – for free.  The business owner is only charged when the ad is clicked.  Business owners pick out relavent keywords and then enter a bid – how much they are willing to pay per click.  This could be as little as $0.10 or much higher – $5.00, $10.00 or more.  The more popular a keyword is, the higher the bid needs to be in order to show up in the first couple of spots.  Bidding on a term such as “home mortgage” is likely to be very expensive.  However, bidding on less poplular terms is much cheaper.  Business owners can set a specific budget as well – I’m willing to pay $0.50 per click but never more than $100 per day.  Once the daily budget is reached (becuase people have clicked on the ads), then the ad simply stops rotation until the next day.

Display Advertising

Where is this used?

Unlinke search advertising, display advertising is an image, not text.  Whenever you surf the web, you likely see display advertising.  These are images that appear on third party websites advertising a product.  You might see an image for febreze on weather.com (like I did – screenshot below), or a completely different ad.  The images appear on MANY sites – foxnews, cnn, wether, local news outlets, radio and tv sites.  This type of advertising is simply images that are linked to the advertiser’s website.

Why do they show up?

Again, unlike search ads, display ads show up for two key reasons:

Reason #1: The advertiser picked the website

As a business owner, I might believe that everyone who visits weather.com is very, very interested in my products.  If I believe this, I might choose to place my display ad on the weather.com website.  My ad shows up because I picked this website.

Reason #2: The advertiser picked the type of people

Unlinke picking the specific website, a business owner might decide that he or she wants to show display ads to anyone who is interested in an outdoor lifestyle (hiking, camping, etc.).  In this case the business owner picks certain lifestyle characteristics.  The advertising platform (often Google) will then show the display ads on websites when it believes a relevant person is visiting this website.  How does the advertising platform know this information?  There are a ton of signals that advertising platforms use.  Two important signals for knowing who you are would be your search history (what have you searched for in the past) and your browsing history (what sights have you visited in the past).  There’s a lot more signals that are often used.  And, as a result, this is where things can get somewhat complicated.  But, again, in the basic form,  a business owner simply targets certains kind of people and the ads show up for those people.

How are these ads paid for?

Just like why they show up, there are two ways these ads are paid for:

Method #1: Pay Per Click

Similar to search ads, display ads can be paid for when a user clicks on them.  The ads are shown, but the business owner only pays when someone clicks on the ad.  This type of payment can be great for the business owner – ads are seen (creating at least some awareness) but only paid for when clicked.  But, this is typically not as great for the website owner (who makes a little bit of money off of the display advertising).

Method #2: Pay Per Impression

The second payment typs is pay per impression.  In this payment model, a business owner is charged based on impressions – a fancy way of saying an ad is seen.  Typically this is done per thousand impressions.  So, a business owner is charged X for every 1,000 impressions.  Ads are often evaluated based on CPM – cost per 1,000 (M being the Roman numeral for 1,000).  While a business owner may prefer pay per click, website owners (especially popular sites) prefer pay per impression.  And, they may only allow this type of ad payment on their site.

Social Advertising

Where is this used?

Social advertising is exactly what the title says it is – advertising that appears in our social media feeds.  When we are scrolling down a Facebook feed, we typically see “sponsored”, “promoted”, “suggested” posts.  All of these are ads.  Business owners told facebook that they are willing to pay to have their creative images and text appear to Facebook (insert any social media platform here) users.

Why do they show up?

Social ads basically show up because they are targeting people like you.  All of us give a great deal of information about us to social media.  Think of all the information Facebook typically knows about us: our friends, our likes, our age, our martial status, our email, our home address, our employment…  the list could go on and on.  And, Facebook knows all of this because we told it to Facebook!

Business owners can then tap into this information and target ads to people like us.  They can never see specific information about people.  But, they can target males, above age 40, who live 20 miles or less from Atlanta, and who love Chevy trucks.  It’s incredibly easy to target people like this inside of social media.

How are these ads paid for?

Similar to text ads, social media ads are TYPICALLY paid for on a pay per click basis.  An ad is usually free until someone clicks on the ad.  Then the business owner is charged for that click.

So, there you have it.  A basic summary of digital advertising.  Those of you who have been involved in digital advertising will likely want to tell me that it is much more complicated than this.  I didn’t even begin to talk about organic search, PLA’s, programmatic ads, demand side platforms, and much more.  And the truth is that I didn’t talk about any of those.  And, they are important.  But, digital advertising doesn’t have to be this vastly complicated unknown black hole.  It can be simplified into three basic types of advertising, each with its own targeting and payment options.

Let me know what you think – what I left out, what I got wrong, what you learned….