What is Performance Based Advertising

What is Performance Based Advertising

Posted by Seventury | 12 December 2016 | Advertising, Marketing
performance based advertising

Performance based advertising is a form of marketing where all ads are bought per measurable action. Some examples of those actions are clicks, purchases or video views.

Performance based marketing makes it easy to calculate the ROI (Return on Investment), ensuring an optimized advertising budget for your brand. This wasn’t always the case in the past, and still isn’t for the more traditional forms of advertising.

The traditional media landscape

Up to a decade ago, the media and advertising world was fairly easy to grasp. With on one hand the TV channels, that would sell TV commercials and occasionally some program sponsoring with a bumper commercial or product placement. On the other hand the big print houses that could sell you ads in a wide variety of magazines and newspapers.

Being a small and medium-sized midsized enterprise (SME), neither of those would be the best option to advertise your product. Targeting possibilities were limited (mainly on interest). You would reach a lot of people, with a high percentage of waste, while paying a lot of money. TV and print seemed to be beneficial mainly for the big advertisers (like P&G, Unilever and L’Oreal) with mass market products. Due to their size, they had a lot of bargaining power to negotiate big discounts, making TV and print campaigns worthwhile. The only affordable options (but still with high waste) for smaller companies were radio and outdoor.

The era of performance based advertising

Then came the era of performance based advertising. New advertising companies popped up, creating new opportunities. Talking about less waste and fantastic targeting; prays were answered by Google. All of the sudden it was possible to buy ads that were only shown when people were typing in a specific keyword (directly linked to your business!). But let’s not forget about Facebook, they made it possible for a local shop to purchase an ad targeted at a specific gender and age, with a certain interest, living in a 10 mile radius of your shop!

David vs Goliath

But wat is really different about this type of advertising is the fact that you pay based on performance. No more big discounts for the big guys and a struggle for small companies to be seen. With performance based ads, the price you pay is based on an elaborate algorithm. It functions like an auction/bidding system, with a maximum cost per click (or view) you are willing to pay and the CTR (click through rate) on your ad deciding whether you will win the bid (and ad placement) or not.

And the best part? Where before you needed (at least!) ten thousands of euros to give a TV commercial a try without knowing what you would get in return, now you can actually start with a small budget and see the results immediately.

Need help?

Would you like to go into advertising with your product or service, but don’t know how? We are here to help!

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