Whether we realize it or not, digital marketing is a huge part of our everyday technology. From browsing a web page to playing Candy Crush on our mobile phones, we can’t seem to escape the ever growing reality of online advertising.
Companies are paying millions of dollars to try and get your attention through the internet. According to Zenith, global online advertising reached a total revenue of $205 billion. Zenith also expects it to grow 4.4 % over the next two years.
But how are companies paying for this online advertising space?
The Evolution of Digital Marketing
Over the years, there have been several different models for companies to assign value to digital advertisements. As online marketing has become more popular, the models have adapted to the growing demand and success of digital marketing.
Pay per Impression
The first ever online advertising payment model is more commonly known as CPM, which stands for cost per 1,000 impressions. If the CPM is $1, then you will be charged $1 for every 1,000 impressions of the ad.
What exactly is an impression?
Impressions are like views. It depends on how many times your ad is displayed to someone. CPM is popular because it is the cheapest choice for online advertising. The major drawback of CPM is that there is no guaranteed marketing return.
Pay per Impression is still common with some heavily trafficked sites such as TechCrunch.
Pay Per Click
As technology began to advance, and websites started to track your internet history, a new model was developed where you only pay when a consumer engages with your ad.
Pay per Click (also known as CPC) is more commonly used on websites such as Facebook, where there are algorithms to optimize the amount of times people click on your link. These algorithms help ensure your ad reaches the right audience.
Pay Per Action
Eventually, online ad pricing went a step further, where advertisers only had to pay for a desired “action.” A desired action can be anything from making a sale to gaining a new follower. This method is very popular on Instagram right now.
The New Trend of Pay Per Transaction
The hot trend of 2017 is likely going to be Pay Per Transaction. This new ad tech strategy originated from the booming success of the new smart home devices such as the Amazon Alexa and Google Home.
Instead of blasting the home user with ads over a smart device, Google developed the idea of having companies pay a transaction fee.
For example, if you were to book a flight over your Google Home, the airline company would pay a small transaction fee to Google as part of the commission.
All the kinks and fluidity are still being figured out, as pay per transaction is still in its prototype phase. When implemented, it could range from being purely transactional to also involving different promotions.
Pay per transaction would help to eliminate a lot of the tension between advertisers and content consumers, since consumers will be actively seeking out the companies they wish to purchase from. No more ad blocking will be necessary, as the model–through the use of artificial intelligence–will only provide ads you wish to actually see/hear.
For now though, companies will have to stick with CPM, CPC, and CPA. The race is on to see which company perfects pay per transaction advertising first in the digital world.
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