Version 5/3/04
You will note that there are links from many of the words and phrases in this text (hyperlinked). By clicking on these links, an additional browser window will open. Many of these links will take you to a Dictionary of Terms, in order to explain the word/phrase (other links take you to other relevant documents). The purpose of the Dictionary of Terms is to allow many users, with different levels of knowledge, to benefit from the text. If there is a term in the text you feel should be better explained, please e-mail me at and I will include it.

Definition of Advertising

Advertising is a paid form of communication via a medium from the business to the consumer. This communication is typically a call to action or a branding message. This session investigates the field of advertising as it applies to the internet. This incorporates advertising on the web, affiliate programs on the web, and advertising via e-mail.

Web Advertising

While web advertising is still a small part of the overall marketing budget for most businesses, one has to consider the web is more than about simply allowing companies to place banner advertisements. The web allows companies to develop a physical presence that allows companies to accomplish multiple tasks (advertising, transactions, customer service, data gathering and community development). These websites, and their effectiveness, are not quantified in the dollar amounts that are noted in the growth of the number of dollars apportioned to this medium. Other media are only supported by advertising dollars. Therefore comparing advertising dollars across media, and then relating that to the impact of each medium, simply does not give the true impact of the web as a medium to accomplish business goals. It is an "apples and oranges" comparison.

**Discussion Topic: Search the web and report the current dollar amounts being spent on web advertising. How does this compare to other media? Why is there such a wide variety of numbers reported across different sources?

Marketers and Media Vehicles

We also need to consider that the web is comprised of two types of business-related sites (and then many more sites that are personal etc.)
  1. Those that host advertisements (equivalent to media vehicles)
  2. Those that do not host advertisements (companies that use the web to communicate to their audiences).
Wired magazine pioneered the former by hosting the first advertisement in 1995. It generates its revenue by attracting an audience to its site in order to have that audience be exposed to its advertisements, it can then charge its advertisers via different models (CPM, CPC, CPA). This is a similar business model adopted by "free" TV and radio. Content is free, subsidized by the advertising revenue.

Types of Web Advertisements

There are five major sources of web-space (vehicles that host advertising campaigns).
  1. Since the primary activity on the web is searching for information, search engines are an attractive source of advertising space. Search engine advertising programs such as Overture and Google AdWords allow marketers to bid on keywords, such that their advertisements appear when a selected keyword is used in the engines that subscribe to the advertising programs. Overture subscribers include Lycos, MSN and Yahoo, Google subscribers include Earthlink and AOL. This allows for very targeted advertising and a great vehicle for direct marketing campaigns.

  2. Major portals are also desirable, and therefore the inventory can carry a premium rate. These portals include sites like Yahoo!, AOL, MSN.

  3. A third source of inventory that is still attractive to advertisers are ISPs. These sites typically host banner advertisements on third party member sites (Geocities for example). As with the second group, the volume is there, but the quality of content is not as robust, and is also subject to the whims of the individual members of the site.

  4. A fourth source are users' own space which has to be sold on to a third party and affiliate providers (below, such as Befree and Linkshare).

  5. A final source is the marketer's own site, as they run promotions within their site. This can be in the form of generic promotions, regardless of who is visiting the site, or promotions based on the visitor's previous purchase behavior. Amazon uses a good example of the latter as it promotes new selections that are related to previous purchases.
Many of the major vehicles still use third party resellers such as Doubleclick (an advertising network) to sell excess inventory, as well as selling directly to marketers. These agencies will take up to 50% of the transaction.

Advertisers typically have a campaign of banner advertisements, hosted on the "vehicles" like Wired (Yahoo etc.) and these banners are linked to a target web page that is related to the advertisement. Sometimes the target site is the advertiser's homepage, but this dilutes the effectiveness of the campaign as the target site should be related directly to the "call to action" of the banner.

While banners (468x60 pixels) are the typical "style" of advertisement, other forms include:

Buttons (120 x 120 pixels or 80 x 33 pixels) contain a very short message, and again will be linked to a target site. While a banner appears (usually) at the top of the page, a button (or series of buttons) typically appear down the left margin. It is risky placing them on the right margin, as the designer then needs to know the width of the screen of the target audience accessing the site.

Pop-up advertisements are advertisements that appear in a separate window when a viewer accesses a page. The effectiveness of these types of advertisements is questionable, and they are rather annoying to the user. They also "pollute" the viewer's computer by adding an extra window that the viewer did not request.

Interstitial pages are advertisements that appear before a page is accessed. Thus when a viewer is accessing their target page, an advertising page appears first, for a specified period of time, and then disappears to be replaced by the page the viewer had requested. Again, this is not a very popular form of advertising on the web. Given the viewer had a certain expectation when accessing the page, and the delay page is a disconnect from that expectation, this can lead viewers to abandon the page they had intended to access. (The switching costs to go somewhere else are minimal!)

Page sponsorship ties the "advertisement" more closely with the content of the site/page, and can be considered a form of contextual advertising. Again, the sponsorship message will be linked to a target site and click through rates are higher. Page sponsorship is also sometimes referred to as Tenancy. Sponsorship deals can be more complex to design for, as banners are an industry standard and can therefore be placed anywhere, sponsorship messages and visuals have to be designed for the specific page that is being sponsored.

The final form of advertisement is the simple text link (hyperlink). This is a more contextual form of advertising than the aforementioned, and prevalent with affiliate programs (below), and search engine advertising using Google Adwords or Overture (above). It has a higher click-through rate than other forms of advertising, but is not as effective for branding. The remainder of this discussion will assume we are considering advertising banners.

**Discussion Topic: Describe your experience with different styles of web advertisements. What style have you clicked-through on, why and why not? How have the advertisements effected your experience with the web?

Web Advertising Issues

There is an interesting conundrum with web advertising that does not impact traditional media advertising (TV, newspapers, radio etc.) An advertisement encourages the viewer to leave the vehicle, to visit the advertiser's page. The vehicle's goal (one would assume) is to not only attract viewers (and advertisers) but to attract viewers long enough (with compelling content) so that the viewer returns on a regular basis. Conversely the advertiser actually wants the viewer to exit the vehicle to enter the target page. Thus there is an interesting balance of goals that is a consequence of the hypertext medium.

Pop-up advertisements, interstitials, and banner advertisements whose target page appears in a separate window (polluting the viewer's machine) are designed to overcome this issue. These forms of advertising are not considered popular and break information design rules.

Another advertising issue that is evolving is who really owns the advertising space that is provided, the content provider (who created the content) or the ISP who is providing the viewer access to the content? Since both the content provider and ISP (assuming a commercial ISP is being used) need to develop business models to sustain business for the long run, and if they are both supported by advertising revenue, their goals may conflict. Software technology has been developed that allows an ISP to replace the content provider's banner advertisements with their own. This issue needs to be resolved in order to develop mutually beneficial relationships between content and access.

Designing Web Advertisements

When designing for the web, it is important to consider the flow of information that the viewer processes. Thus when designing an advertisement (assume a banner advertisement) the designer needs to consider: as they relate to the goal of the advertising campaign. It is simple to design advertisements that generate a high percentage of click-through (enter free to win a million!! get your free BMW! etc.) but it is important to design to encourage the right target audience to click on the banner to access the target page. Then consider whether the target page's design is relevant in the context of the content of the banner advertisement (and the goals of the advertising campaign). Attracting high click-through that is irrelevant to the advertising campaign can be very costly if the business model for the advertisements is on a click-through rate. It is also important to consider the content of the vehicle, and does it attract the precise target audience you are looking for. The web is a mass niche-medium, thus finding sites that directly relate to your product is key. This is why affiliate programs (below) can be successful, the vehicles (affiliates) are self-selecting, and presumably for the most part, doing so because they are a great fit for your audience (or will develop an entry page that is a great fit).

While animation in the banner advertisement may be a good thing to attract attention, you need to determine if the vehicle you are using allows animated banner advertisements. The banner advertisement essentially impacts the overall design of the vehicle's page, so this may not always be the case. Rich media advertising (using flash, real player and mpeg standards) are beginning to evolve. These may be more engaging, but it is important to understand the vehicle's restrictions and the viewers' capabilities in terms of viewing the advertisement.

**Discussion Topic: Identify and discuss excellent (or poor) examples of design for banner advertisements that you have experienced ... or browse the web to find some!

Advertising Metrics

When determining how many viewers are exposed to a banner advertisement we often hear a myriad metrics cited. The following are the most common: It is important to understand the specifics of these metrics as one determines the business model used to pay for the banner advertisements.

Business Models for Hosting Advertisements

The following are the more common business models that are being used by vehicles to host advertising banners. As advertisers and their hosts negotiate the appropriate business model, a mix of models can occur, that pays for impressions, and for actions that the viewers take.

**Discussion Topic: Discuss the various merits of the above business models. Which type of model will be prevalent in the long-run?

**Discussion Topic: Visit the Interactive Advertising Bureau, and discuss its role in the industry, and some of its findings to date.

Alternative Advertising (Business) Models

Due to the youth of the web as a medium, and the many evolving companies trying to establish a presence, where cash flow is a premium, a few creative alternatives have spawned to avoid paying for advertising space. **Discussion Topic: Discuss the merits of the above "free" advertising methods, and other more creative ways to advertise on the internet.

Network Advertising

Advertising networks are an intermediary between the advertiser and the vehicles hosting advertisements. They allow media buyers to buy advertisements across many web sites, and allow web sites to outsource the sale of advertising inventory, complementing its own sales efforts. Advertising networks may offer advertisers a run of network option, or a run of category option, within the network. is a popular network.

Affiliate Advertising

Affiliate Programs are an alternative category of advertising for companies, and a potential source of revenue for company affiliates (those individuals subscribing to affiliate schemes). An affiliate program is styled after the concept of using your customers to attract more customers, and for doing so the affiliate receives a reward. Thus it is a form of Multi-Level Marketing. In fact, some affiliate schemes are multi-tiered, thus the affiliate is rewarded not only for the sales of merchandise, but for recruiting new affiliates and the sale of their merchandise.

The business model for affiliate schemes is similar to the CPC or CPA as mentioned above. The affiliate receives either a cut for delivering "eyeballs" (CPC) OR for delivering a lead (CPL) or sale (CPS). The advantage of an affiliate scheme, over a straight advertising banner campaign using the aforementioned models, is simply it puts the onous on the potential affiliate to subscribe to the scheme, rather than the advertiser trying to find advertising space on media vehicles. It also targets customers to host the advertisements, and small entities which are difficult to work with under a traditional advertising banner campaign. Conversely the advertiser does not have control over the quality of vehicles.

A company can take a couple of approaches as it develops its affiliate program. It can develop its own affiliate scheme, as and have done. Or it can outsource its affiliate program to others.

**Discussion Topic: Compare and contrasts the merits of the Amazon and Barnes and Noble affiliate programs linked above. Which would you choose if running your own bookstore as an affiliate? As you do this, you can access this bookstore, an amazon affiliate designed by the author.

In house programs carry the risk of not tapping into the networks that the major affiliate schemes have developed. It can make sense for a company to work with multiple networks so as not to exclude potential sales. This can be done in conjunction with an in-house scheme for the larger marketers. BeFree is the leading third party scheme, and sells software and provides a large network (in theory, in practice it comprises a few large affiliates). Linkshare another popular affiliate network.

The downside of an affiliate scheme over a traditional advertising campaigns are based on the potential for fraud and the cost of tracking. Affiliates can potentially manipulate their earning potential, especially with schemes that are based on a CPC model.

**Discussion Topic: Are affiliate schemes going to become an increasingly important form of advertising? What are the potential drawbacks to further adoption? Can they be used to combine web and offline marketing programs?

E-mail Advertising

Most of us are recipients of e-mail advertisements, and perceive the majority as spam e-mail in our in basket. It is surprising that we receive it if its perception is that it does not work. But of course that is not the case, e-mail advertising does work, if done correctly.

The web is unobtrusive, thus a marketer needs a means to reach out to its customers, and e-mail is certainly a means for doing that that can then link directly to the marketer's website. With good design, and good use of subject headers, the effectiveness of the e-mail can increase. One has to consider the receiver has to undertake three transactions. Firstly, open the e-mail (a function of the design of the subject header) and then read the e-mail (a function of the design of the content of the e-mail) and click through to a website (a function of the call to action). The economics of this type of marketing make much more sense that direct mail campaigns, since the marginal cost of sending an additional e-mail is zero, the cost is associated only with developing the content of the e-mail and buying the e-mail list.

E-mail advertising can fall into three categories:

  1. Many marketers use "opt-in" e-mail options on their website, that encourages customers and viewers to "subscribe" to the site to receive updates. This is very important, and important for the site, when delivering those updates to do so, on a regular basis, with content that is relevant and interesting, and using a subject header that works. Thus e-mail advertising with this form can prove very effective, and is a marketing opportunity that companies cannot afford to miss. This form of advertising has be referred to as Permission Marketing. A user is encouraged to "opt-in" to receive e-mail updates (user gives permission), the company provides incentive to keep the user engaged over a series of e-mails (either through offering compelling content, ability to win prizes etc.) and through the series of e-mails the company is able to educate the user on the merits of the product. Thus the marketer is able to take advantage of the unique combination of the web and e-mail to develop a series of communications that keeps the individual customer engaged, not simply one time communications, typical of more traditional advertising. The FastCompany article Permission Marketing highlights this topic.

  2. The second form of e-mail advertising is the form we typically do not like, the unsolicited spam mail we receive, in droves, if our e-mail address is somewhere on the internet. While this is perceived as poor marketing, the economics suggests it can be more effective than traditional direct mail.

  3. The third form of e-mail advertising is simply placing advertisements in e-mail newsletters that users subscribe. This is similar to running advertisements on a web vehicle, although this is an e-mail vehicle. Marketers make an assumption that their audience can view rich media e-mail.
**Discussion Topic: Discuss your experience, as a consumer or marketer, with e-mail marketing. What has worked, what has not worked, and how would you implement such a campaign for your organization?

A couple of e-mail lists you may want to subscribe to if these topics really interest you: