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Marketing 101 Part 3: Advertising Part I

Part 3: The Lingo

There are four basic types of ads, and technically they can all be broken down into a single figure (CPM). However, until you know other factors this may not be so easy.

CPM stands per thousand impressions. An impression is each load or view of a website page. CPM is the most commonly used advertising type. If an ad is $1 CPM then it costs you $1 to display the ad 1,000 times. Most sites do this on a NON UNIQUE basis! This means if you buy 100% of the ad inventory for a day, if someone views 10 pages you get charged 10 times (if its $1 CPM, 10 page views is 1 cent). Many websites, however, have advanced options such as limiting the displays per session or displays per day. Be sure to talk to the ad representative about the various options.

There are some more important numbers to get to know and you should ask the person you are thinking of advertising with these things. First, you need to know how many unique visitors they get per day and how many banner impressions they show per day. This will give you the average number of page views per person (Displays / Unique Visitors). In order to have an effective ad, you should make sure the average person sees your advertisement multiple times, however, buying 100% is too much. Each marketing person will vary what they tell you and there is no rule on how much is the perfect amount. I suggest ensuring your ad is displayed 2-3 times per visit as a starting point and probably no more than 50% of the time, each website will vary based on its demographic and really on how well your banner and their site are designed.

CPC ads are uncommon, but you do find them in places. CPC stands for cost per click. CPC ads are nice in that you are guarantied traffic for your money. A lot of inexperienced people believe that CPC is the best way to advertise; however, due to the low risk involved, CPC rates tend to be higher than CPM rates when your banner is well designed and targeting the right group. Advertisers dislike CPC because if you design a crappy banner they end up having to display it that many more times, which costs them money! The ironic reality of CPC ads is that you WANT them to generate only qualified leads. If you can make your CPC ad unappealing to all people except the ones most likely to buy it, all the better for you! CPC is most commonly used in Seach Engine Advertising.

CPA ads are the least common. It stands for Cost per ACTION. Advertisers hate these because not only does someone have to click on the banner but they also have to perform some kind of action (download the product, register, ect). You are welcome to try to negotiate a CPA payment for an ad, but the cards will be stacked against you. However, if you CAN, a CPA action eliminates almost all of the risk on your side.

Finally, a fairly common method is a month (or general time) based cost system. There are several important things to know. First, how many other advertisers are there? Second, how many visitors and how many page views (again, so you can get average number of page views per person)? Make sure that in these scenarios your banner will be displayed more than once on average per visitor or demerit the site accordingly. Let's look at an example:

Site 1 has 100,000 visitors a day and 6 advertising slots that are going to be full (you would be #6). The average page views per person is 3, meaning the site generates 300,000 page views a day. The cost of the ad is the same as site 2.

Site 2 has 50,000 visitors a day, 3 advertising slots, and an average of 5 page views per person. We'll assume both have identical demographics. Site 2, even though it has less visitors, is the better buy because you will reach almost every visitor and reach most more than once, whereas site 1 you would completely miss half the visitors that day.

There are exceptions to this rule based on how frequently visitors return to sites and other factors. For instance, Comic based sites have a lot of people who visit multiple times a week. This means if you missed half the visitors that day it is not so important since they will be back tomorrow and then next day as well. The best thing to do may be ask the ad rep why you should pick them and see how they respond.

So I had mentioned these all go back to CPM models. What this means is CPM can be a common denominator for determining ad cost. Keep in mind, however, that this is a FALSE number. In order to accurately represent each ad you need to adjust for many more factors, such as the type of site, the demographic match, how many other competing ads there are, ect. In order to do this easy math you simply take a CPM ad and determine your average click through rate (How often someone clicks on the ad, also known as CTR). If your ad is getting .5% CTR (Which is somewhat low for a good ad) and costs 50 cents per 1,000 impressions you are paying .10 cents per click (CPC). If, from this site, it takes 3 visitors to download or sign up for a game, you are paying .30 CPA. So, basically, all these terms are interchangeable and each carries a specific risk factor for both parties involved.

Part 4: The Example

Now that we know all the background information we can put it all together and make some real decisions on advertising. The following will demonstrate the process step by step.

First, get your conversion rate and demographic information ready. We will say that your conversion rate in this example is 1%.

Next, find out the price, demographics, and web statistics (visitors, page views, ect.) of the website in question. We will say that this site is a great match on your best demographic and has 100,000 visitors, 300,000 page views, and charges .50 CPM.

To run an effective ad on this site, I would suggest buying about 120,000 page views. That is 60 dollars in ads. If you have designed a good banner (which will be discussed in the next article) and the site has a good ad layout (also discussed in the next article), you can expect a CTR of .5% or more. If your ad is below .5% you should be looking for causes. So, 120,000 page views at .5% is 600 visitors going to your site. If you have a well designed site and great targeting of your ad that may be 300 downloads of your product. Since you were converting at 1% that is three sales that you should get, right? Wrong! This site had a better demographic than your average trend as stated above. It is therefore logical to assume that you will convert at a higher than 1% rate! Lets assume it boosts you to 1.33% from good targeting. That means you got 4 sales from this 60 dollar ad. Lets assume you get $18 per sale net profit (a 20 dollar game with 10% processing/BW cost). You just turned your 60 dollar investment into $72. All of these numbers are fairly average. You can find better deals than these, I promise you. Even using very typical numbers we were able to turn a profit on a game that converts 1%. Plus this does NOT take into account word of mouth generated or additional publicity your ad may generate! If, on an ad, you spend 60 dollars and make 60 dollars in sales you have come out ahead. Why? Because there are now more people who are familiar with your brand, your product, and there are some new customers whom you can sell your NEXT product to.

Tune in next time for Advertising Part 2, where we will delve into the actual pros and cons of each advertising type, the best design methods, and much more.

About the Author

Joseph Lieberman is the founder and owner of vgsmart.com, the only company dedicated to independent game marketing. To receive more helpful tips via e-mail, sign up for our newsletter at www.vgsmart.com

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The Series
  The 4 Ps
  Contacts and Contracts
  Advertising Part I