Online advertising is advertising on the Internet. This particular form of advertising is a source of revenue for an increasing number of websites and companies.

There are two sides to online advertising, a legitimate one and an illegitimate one. The legitimate side of online advertising includes search engine advertising, advertising networks and opt-in e-mail advertising. The illegitimate side is dominated by spamming.

Though the range of advertising options has expanded since in the commercialization of the Internet, the use of rich media and static images is extremely popular. The ever-increasing audience of online users will likely continue to be a major advertising market.

Overview of the market

A significant number of firms, from small businesses to multinational corporations, incorporate online advertising into their marketing strategy. This is even true of firms which conduct their business through more traditional brick and mortar channels. In response to this demand, a number of firms specialize in facilitating online marketing. Therefore, online advertisements typically involve at least two separate firms: the advertiser or agency which purchases or sponsors the advertisement and the publisher or network which distributes the ad for display. Additional parties may also be included, such as an ad serving technology provider, a third party sales network, or other combinations.

In capitalizing on the increasing importance of the Internet as a marketing medium, the online advertising industry has developed specialized technical systems to manage the ways ads are distributed and viewership totaled. The Internet Advertising Bureau (IAB) has established guidelines for the counting methodology, size requirements, and other aspects of the business.

Because of the close relation between technical innovation and online advertising, many firms specialize in both. For example, most search engines couple their search service with an advertising program, exploiting the benefits of keyword-based search technology by including ads in search results. Many technology firms specialize in ad serving, the systems used to select the ads to show, optimize results, and generate reports.

Payment conventions

Because of the ability to track results of online advertising at a more granular level than what is available through traditional advertising, varying ways have developed for the advertisers and publishers to do business. The three most common ways in which online advertising is purchased are CPA, CPC, and CPM.

CPA (Cost Per Action) or (Cost Per Acquistion) advertising is performance based and is common in the affiliate marketing sector of the business. In this payment scheme, the publisher takes all the risk of running the ad, and the advertiser only pays for the media on the basis of the number of users who complete a transaction, such as a purchase or sign-up. This is the best type of rate to pay for banner advertisements, and the worst type of rate to charge. Similarly, CPL (Cost Per Lead) advertising is identical to CPA advertising and is based on the user completing a form, registering for a newsletter, or some other action that the merchant feels will lead to a sale. Also common, CPO (Cost Per Order) advertising is based on each time an order is transacted.

CPC (Cost Per Click) advertising is also performance based and is common in search marketing, where it is often known as Pay per click (PPC). In this scheme, an advertisement may be displayed (and assumedly viewed) many times, but the advertiser only pays based on the number of user clicks. This system provides an incentive for publishers to target ads correctly (often by keyword), as the payment depends upon the ad not only being seen, but the viewer responding and following the hyperlink.

CPM (Cost per Thousand) advertising is the most common basis in the business and is used for most display advertising and rich media. This scheme most closely resembles offline advertising, wherein the advertiser is paying for exposure of their message to a specific audience. CPM costs are priced per thousand.

Rich Media advertising

The display advertising portion of online advertising is increasingly dominated by rich media, generally using Macromedia Flash. Rich media advertising techniques make overt use of color, imagery, page layout, and other elements in order to attract the reader's attention. Some users might consider these ads as intrusive or obnoxious, because they can distract from the desired content of a webpage. Some examples of common rich media formats and the terms of art used within the industry to describe them:

• Banner ad: A standard image displayed on a Website. Banner ads come in numerous sizes, but are often rectangles 460 pixels wide by 60 pixels high.
• Interstitial ad: The display of a page of ads before the requested content.
• Floating ad: An ad which moves across the user's screen or floats above the content.
• Expanding ad: An ad which changes size and which may alter the contents of the webpage.
• Polite ad: A method by which a large ad will be downloaded in smaller pieces to minimize the disruption of the content being viewed
• Wallpaper ad: An ad which changes the background of the page being viewed.
• Trick banner: A banner ad that looks like a dialog box with buttons. It simulates an error message or an alert.

In addition, ads containing streaming video or streaming audio are becoming very popular with advertisers.

Email advertising

Legitimate Email advertising is often known as opt-in e-mail advertising to distinguish it from spam.

Affiliate marketing

Affiliate marketing is a form of advertising where the advertiser allows a potentially large number of small publishers to pick specific creative elements or offers to market in exchange for payment should such marketing create sales or other revenue. This is usually accomplished though a self-service online system, such as those offered by third parties like Performics, Commission Junction/BeFree, or Linkshare.

Affiliate marketing was an invention by CDNow.com in 1994 and was excelled by Amazon.com when it launched its Affiliate Program, called Associate Program in 1996.

The online retailer used it's program to generate enormous volumes of low cost brand exposure and provided at the same time small Websites a way to earn some supplemental income with their Sites.

Refer to Affiliate marketing to find out more about this advertising model and compensation structure.

Contextual advertising

Many advertising networks display text-only ads that correspond to the keywords of an Internet search or to the content of the page on which the ad is shown. These ads are believed to have a greater chance of attracting a user, because they tend to share a similar context as the user's search query. For example, a search query for "flowers" might return an advertisement for a florist's website.

Another newer technique is embedding keyword hyperlinks in an article which are sponsored by an advertiser. When a user follows the link, they are sent to a sponsor's website.

Ads and malware

There is also class of advertising methods which may be considered unethical and perhaps even illegal. These include external applications which alter system settings (such as a browser's home page), spawn pop-ups, and insert advertisements into non-affiliated webpages. Such applications are usually labeled as spyware or adware. They may mask their questionable activities by performing a simple service, such as displaying the weather or providing a search bar. Some programs are effectively trojans. These applications are commonly designed so as to be difficult to remove or uninstall. The ever-increasing audience of online users, many of which are not computer-savvy, frequently lack the knowledge and technical ability to protect themselves from these programs.

Creative Uses

Online advertising is not always sneaky. For instance, The Hunger Site uses online ads to generate revenue which is donated to charities that fight hunger. Altruistic site visitors willfully subject themselves to these ads by clicking, and the advertisers pay a certain rate based on the number of times their ads are viewed. This is an example of a Click-to-donate site.

In addition, the organization of information available online has given birth to the online directory.

Offline advertising

As online advertising has become more and more prevalent, and has taken a larger proportion of an advertiser's budget, the phrase, and concept of, offline advertising - i.e. any advertising not done online, has begun to get some traction. The phrase is generally used in the context of a advertising campaign that takes place on the web and through other media, that is a "cross-media" campaign.

Banner Advertising

When a company is advertising themselves, they may use a banner to do this, rather than using a traditional 500x500 pixel area. For example, this Football Forum banner is a modification of the standard 800x101, at 700x90.

• html coding*

They generally incorporate a link in the image, meaning that a single click on the banner takes you straight to their website.

See also

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• Industry calculations: Click Through Rate(CTR), Cost Per Action(CPA), effective Cost Per Action(eCPA), Cost Per Click(CPC), Cost Per Impression(CPI), Cost Per Mille(CPM), effective Cost Per Mille(eCPM)
• Web advertising: Web banner, Ad filtering, central ad server, pay per click, Pop-up ad, click fraud, Affiliate marketing
• E-Mail advertising: e-mail spam, opt-in e-mail advertising, Spamming
• Search Engines: Search Engine Marketing (SEM), Search Engine Optimization (SEO)

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