The Mechanics of Buying Online Media

Last week we talked about the philosophy of ad markets, noting that while online and offline advertisers may differ enormously in form and function, the philosophy of advertising remains the same. We also covered traditional advertising mechanics, addressing the basic measure of a media buy and explaining how media is purchased. This week we focus on the mechanics of online advertising.

The online world’s markets may work similarly to those of traditional media, but the delivery mechanisms remain so vastly different that we need to add some new dimensions to the way we think about them.

The online site is free from the fetters of circulation-based or ratings-based packages we see in traditional media. Online, sellers can package-up certain areas of the site, certain times of day, or an arbitrary number of impressions.

Unfortunately, this means online buyers may no longer rely on circulation audits to ensure that they got their money’s worth. Whereas before we knew that the same number of folks who saw a magazine had the potential to see a particular ad, we now have a very confusing set of different possible measures.

In a future column I will go through the technical explanation of how an ad is delivered online and the various consequences of these technical nuances, but for this week, it is enough to illustrate the broad implications of having a great deal of flexibility in ad packages.

Suffice it to say that instead of circulation, advertisers look directly at impression numbers, as defined by the various technical measures web sites produce on their own.

Often, the media get further divvied up by various targeting technologies. Advertisers will frequently buy a certain number of impressions but only when the ad appears in a certain context, like when a viewer is doing a search using a very particular keyword search. Not surprisingly, sites like search engines employ this targeting method very frequently.

Just to make things more interesting, we also purchase media based on measures in addition to impressions. We can, for instance, pay for each time someone clicks on our ad what we call cost per click-through or CPC.

But we’re not done there. We can also follow that user from the original site where the ad appeared, onto our client’s site. This allows us to purchase media based on how many people actually buy something on our client’s site or perhaps perform some other objective measure. We call this type of buying cost per transaction, or CPX.

A word of warning: Some folks use the term CPT to mean cost per transaction. Most tend to avoid this because it conflicts with another ill-favored term: cost per transfer. Sticking to CPC and CPX should reduce confusion.

To review, purchasing online media is a bit more complex than purchasing traditional media. We can buy not only impressions, but click-throughs and transactions as well. Sometimes, folks even buy combinations of these, paying a basic impression rate in addition to premiums for either click-throughs or transactions. We measure this performance independent from the circulation of the web site.

You can see how this makes online media buying a bit more of a juggling act. Agencies find that individual buyers can handle only a much smaller budget because there tend to be many, many smaller transactions, rather than several large ones that are more traditional in print. Future columns will address these problems and even suggest some solutions.

Next week we’ll go over some of the technical processes and the data we get from them. This will begin to reveal some of the bigger headaches of buying online media namely, acquiring all the relevant data into one place and ensuring you’re dealing with apples-to-apples comparisons.

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