Comparing Advertising Costs and Effectiveness

 

Comparing Advertising Costs and EffectivenessCost per 1000 people

With the introduction of internet advertising, one of the common questions that gets asked is “Is it cost effective”

Is Internet Advertising Cost Effective

When compared to traditional marketing, internet marketing is the most cost-effective way to advertise but does require you to get your advertising settings correct to maximise your spend. With the wrong settings, you could advertise with very little return.

Internet advertising companies use a term CPM, or cost per 1000 impressions of your ad being seen. Both Google and Facebook have definitions for CPM.

Google definition of CPM

Facebook definition of CPM

CPM allows us to compare this to other forms of advertising, as they also provide readership or listeners audience statistics. These comparisons will differ with each publication or broadcaster, as each one has a different audience, coverage and demographics. So as a general comparison the cost to reach 1000 people, the numbers look like this:

Newspaper               $32

Magazine                  $20

Radio                        $8

TV                             $6

Internet                   $0.25 to $2.75

Unfortunately, you will not get a TV advert for $6, as it requires a significant upfront investment for the ad to be produced and for the advertising spots. This is the same with the other forms of advertising, where getting an advert in the newspaper or magazine requires an upfront investment to even get started.

We compare this to internet advertising where your minimum spend can be as low $1 a day. You are able to set a budget with most internet advertising systems, giving you the ability to manage your spend.

With internet advertising, you mostly pay per interaction being a Cost per Click or Cost Per Conversion (CPC). Cost Per Click is anyone who is presented you advert and clicks on it. Cost Per Conversion is anyone who is presented your advert and completes a specific action, such as a purchase or email subscription.

This makes internet advertising very appealing, with a lower cost to reach 1000 people and a lower entry-level cost.

How Effective is Internet Advertising

Internet advertising is very effective because it allows you to define your target audience and a range of other parameters based on your advertising goals. Your ads will only be shown to people who match your parameters.

Advertising platforms give you the ability to get very specific when targeting an audience. There are hundreds of targeting options. Some examples are income, location, interests, past purchasing behaviour, friends of people who already like you, those who have engaged in the past, age, family composition, events, home ownership, industry, job title and more. On some platforms, you can even get the system to find people with a similar profile to those who have already purchased from you.

Your focus then turns to click through rate (CTR), which is a measure of how many people interacted with your advertisement. Most internet advertising platforms provide you with statistics for CTR. To achieve a good CTR your advertisement needs to provide a strong value proposition and a clear call to action for your target customers. With internet advertising, you have the ability to run A/B testing, where you run multiple ads with different messages and calls to action. You can then measure which ads work better for your target audience.

One of the most significant elements of internet advertising is your ability to measure the effectiveness of your ads and quickly adjust them for better results. Some advertising platforms provide close to real-time reporting. By comparison, other forms of advertising are more difficult to measure and take longer for you to determine the effectiveness of your advert.

Let us compare internet advertising with other forms of advertising.

  • Newspapers: Based on the readership and demographics good advertising for local business and in some cases target audiences. But in most cases, they have a broad readership base, which makes it difficult to target audiences. One chance to get your message right. Difficult to measure.
  • Magazines: Often targeting a specific audience, so good for brand recognition, promotions and product advertising. One chance to get your message right. Difficult to measure.
  • Radio: A broad audience. Good for specific promotions and brand recognition. Difficult to target.
  • TV: A broad audience, but offers the best brand recognition and engagement. TV is reported to provide the best return on investment, but with significant financial risks due to the upfront costs. An expensive entry point, so if you get your message wrong it can be difficult to get a return on investment. Audience engagement can drop off very quickly.
  • Internet: Ability to target the audience based on parameters or prior interest. Ability to measure advert effectiveness and make adjustments very quickly. Can be difficult to learn how to use.

We have seen the current increase of video advertising on the internet. With internet and cell phone connections improving, video can now be seen effectively by customers. Internet companies like Semrush https://www.semrush.com and Search Engine Land https://searchengineland.com/ are telling us that like TV, video advertising engagement is more effective than static ads on the internet.

So to summarise, internet advertising is effective:

  • You can get your adverts in front of more people for less money than other forms of advertising
  • Lower cost of entry
  • You can control your advertising budget
  • You can target your preferred audience using a range of parameters
  • You can measure and adjust your advertising based on the levels of engagement
  • You can use a range of advertising mediums.

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