I used to be an advertiser for a small startup and managed a monthly budget upwards of $30K per month.  At the time, I thought I knew a fair amount about the world of online advertising, but really I had just scratched the surface of the possibilities.  As technology stands today, big advertisers with big budgets have access to a wealth of tools and information that are simply unknown or unavailable to the vast majority of businesses.clueless man

Why are these things virtually unknown?  Simple.  Many of the technologies require human support and therefore agencies or networks put minimum ad budgets in place.

So, here’s a quick summary of what I think small businesses generally don’t know about online display advertising:

CPM Buys – Nearly all display advertising is purchased on a CPM basis.  If you, as an advertiser, are purchasing on a CPC or CPA, that just means someone is taking the “risk” for you and buying on a CPM and billing you the difference.  I put “risk” in sarcastic quotes because it is short term risk for the vendor.  If they end up not making a good enough margin, there are ways to just scale back so they don’t lose any money and you don’t get any benefit.  My belief is that the whole industry is trending back toward CPM as the basis for all ad spend because it aligns the goals of advertisers and intermediary agencies or technologies.  Then together, you can make smart decisions about which impressions to buy based on past performance.

Retargeting – It’s several years old as a technology, but still many advertisers don’t know about retargeting.  It’s a technology that allows advertisers to target ads only to people that have been to their site before.  It performs anywhere from 2x – 4x better than more traditional display advertising campaigns that might just across an entire ad network.

Behavioral Targeting – This one is a big surprise to most people.  Did you know that when you are browsing Kayak.com or Shopping.com or any other comparison shopping type site, your data is being tracked and later sold.  Contrary to privacy concerns, I believe this is a good outcome for most consumers.  Here’s how it works – Shopping.com places a cookie on your browser that records your intent data, eg you searched for a “digital camera.” Shopping.com then sells this data to a data provider, such as BlueKai or Exelate.  These data providers then turn around and sell this data along with a healthy markup to advertisers or to ad networks.  Advertisers can then select a defined list of users that have, for example, previously searched for “digital cameras” in the past 30 days.  They may also have very good demographic data as well, including gender, age, income, geographic location.

Ad Personalization – Try this.  Go to a few online travel sites and start searching for flights to Las Vegas.  Then go to a bunch of other unrelated sites, eg YouTube, and let me know if you start seeing ads for flights to Las Vegas.  Several companies, (including AdRoll), can utilize data feeds that include keywords searched, URLs visited, time on page, pages / visit, etc.   Combine that data with a feed of possible banner ads, landing pages, and special promotions, and you can now get fully customized ads.  More advanced advertisers are utilizing these feeds and in some cases, APIs to internal data, to provide a highly personalized ad experience.

Channel Combination – small advertisers tend to be ruthlessly focused on channel by channel optimization.  For example, testing out a $250 ad buy on display and looking at cost per conversion.  If the results are above the target CPA, test is over.  If the results are lower (better) than the target CPA, the business will typically invest more.  What some small advertisers don’t realize, is the cross-channel impact of campaigns.  Basically, a well executed display advertising campaign will positively impact search campaigns, and vice versa.

Margins – When you spend $100 on advertising, do you know how much of that reaches the publisher?  In most online advertising transactions, there are a number of middlemen that each would like a cut of that $100 pie.  Take a look at a previous post on overview of display advertising world.  So, the reality is that, most likely, anywhere from 25 – 40% of your spend is making it to the publishers.