Search engine marketing (SEM) is a form of Internet marketing that involves the promotion of websites by increasing their visibility in search engine results pages (SERPs) primarily through paid advertising. SEM may incorporate search engine optimization (SEO), which adjusts or rewrites website content and site architecture to achieve a higher ranking in search engine results pages to enhance pay per click (PPC) listings.
In 2007, U.S. advertisers spent US $24.6 billion on search engine marketing. In Q2 2015, Google (73.7%) and the Yahoo/Bing (26.3%) partnership accounted for almost 100% of U.S. search engine spend. As of 2006, SEM was growing much faster than traditional advertising and even other channels of online marketing. Managing search campaigns is either done directly with the SEM vendor or through an SEM tool provider. It may also be self-serve or through an advertising agency. As of October 2016, Google leads the global search engine market with a market share of 89.3%. Bing comes second with a market share of 4.36%, Yahoo comes third with a market share of 3.3%, and Chinese search engine Baidu is fourth globally with a share of about 0.68%.
Paid inclusion involves a search engine company charging fees for the inclusion of a website in their results pages. Also known as sponsored listings, paid inclusion products are provided by most search engine companies either in the main results area or as a separately identified advertising area.
The fee structure is both a filter against superfluous submissions and a revenue generator. Typically, the fee covers an annual subscription for one webpage, which will automatically be catalogued on a regular basis. However, some companies are experimenting with non-subscription based fee structures where purchased listings are displayed permanently. A per-click fee may also apply. Each search engine is different. Some sites allow only paid inclusion, although these have had little success. More frequently, many search engines, like Yahoo!, mix paid inclusion (per-page and per-click fee) with results from web crawling. Others, like Google (and as of 2006, Ask.com), do not let webmasters pay to be in their search engine listing (advertisements are shown separately and labeled as such).
Some detractors of paid inclusion allege that it causes searches to return results based more on the economic standing of the interests of a web site, and less on the relevancy of that site to end-users.
Often the line between pay per click advertising and paid inclusion is debatable. Some have lobbied for any paid listings to be labeled as an advertisement, while defenders insist they are not actually ads since the webmasters do not control the content of the listing, its ranking, or even whether it is shown to any users. Another advantage of paid inclusion is that it allows site owners to specify particular schedules for crawling pages. In the general case, one has no control as to when their page will be crawled or added to a search engine index. Paid inclusion proves to be particularly useful for cases where pages are dynamically generated and frequently modified.
Paid inclusion is a search engine marketing method in itself, but also a tool of search engine optimization, since experts and firms can test out different approaches to improving ranking and see the results often within a couple of days, instead of waiting weeks or months. Knowledge gained this way can be used to optimize other web pages, without paying the search engine company.
Pay-per-click (PPC), also known as cost per click (CPC), is an internet advertising model used to direct traffic to websites, in which an advertiser pays a publisher (typically a website owner or a network of websites) when the ad is clicked.
Pay-per-click is commonly associated with first-tier search engines (such as Google AdWords and Microsoft Bing Ads). With search engines, advertisers typically bid on keyword phrases relevant to their target market. In contrast, content sites commonly charge a fixed price per click rather than use a bidding system. PPC "display" advertisements, also known as "banner" ads, are shown on web sites with related content that have agreed to show ads and are typically not pay-per-click advertising. Social networks such as Facebook and Twitter have also adopted pay-per-click as one of their advertising models.
However, websites can offer PPC ads. Websites that utilize PPC ads will display an advertisement when a keyword query matches an advertiser's keyword list, or when a content site displays relevant content. Such advertisements are called sponsored links or sponsored ads, and appear adjacent to, above, or beneath organic results on search engine results pages, or anywhere a web developer chooses on a content site.
The PPC advertising model is open to abuse through click fraud, although Google and others have implemented automated systems to guard against abusive clicks by competitors or corrupt web developers.
Pay-per-click, along with cost per impression and cost per order, are used to assess the cost effectiveness and profitability of internet marketing. Pay-per-click has an advantage over cost per impression in that it tells us something about how effective the advertising was. Clicks are a way to measure attention and interest. If the main purpose of an ad is to generate a click, or more specifically drive traffic to a destination, then pay-per-click is the preferred metric. Once a certain number of web impressions are achieved, the quality and placement of the advertisement will affect click through rates and the resulting pay-per-click.
Pay-per-click is calculated by dividing the advertising cost by the number of clicks generated by an advertisement. The basic formula is:
Pay-per-click ($) = Advertising cost ($) / Ads clicked (#)
There are two primary models for determining pay-per-click: flat-rate and bid-based. In both cases, the advertiser must consider the potential value of a click from a given source. This value is based on the type of individual the advertiser is expecting to receive as a visitor to his or her website, and what the advertiser can gain from that visit, usually revenue, both in the short term as well as in the long term. As with other forms of advertising targeting is key, and factors that often play into PPC campaigns include the target's interest (often defined by a search term they have entered into a search engine, or the content of a page that they are browsing), intent (e.g., to purchase or not), location (for geo targeting), and the day and time that they are browsing.
In the flat-rate model, the advertiser and publisher agree upon a fixed amount that will be paid for each click. In many cases the publisher has a rate card that lists the pay-per-click (PPC) within different areas of their website or network. These various amounts are often related to the content on pages, with content that generally attracts more valuable visitors having a higher PPC than content that attracts less valuable visitors. However, in many cases advertisers can negotiate lower rates, especially when committing to a long-term or high-value contract.
The flat-rate model is particularly common to comparison shopping engines, which typically publish rate cards. However, these rates are sometimes minimal, and advertisers can pay more for greater visibility. These sites are usually neatly compartmentalized into product or service categories, allowing a high degree of targeting by advertisers. In many cases, the entire core content of these sites is paid ads.
Cost per impression (CPI), or "cost per thousand impressions" (CPM), is a term used in traditional advertising media selection, as well as online advertising and marketing related to web traffic. It refers to the cost of traditional advertising or internet marketing or email advertising campaigns, where advertisers pay each time an ad is displayed. CPI is the cost or expense incurred for each potential customer who views the advertisement(s), while CPM refers to the cost or expense incurred for every thousand potential customers who view the advertisement(s). CPM is an initialism for cost per mille, with mille being Latin for thousand.
Cost per impression, along with Pay-per-click (PPC) and cost per order, is used to assess the cost effectiveness and profitability of online advertising. CPI is the closest online advertising strategy to those offered in other media such as television, radio or print, which sell advertising based on estimated viewership, listenership or readership. CPI provides a comparable measure to contrast internet advertising with other media.
Impression versus pageview
An impression is the display of an ad to a user while viewing a web page. A single web page may contain multiple ads. In such cases, a single pageview would result in one impression for each ad displayed. In order to count the impressions served as accurately as possible and prevent fraud, an ad server may exclude certain non-qualifying activities such as page-refreshes or other user actions from counting as impressions. When advertising rates are described as CPM or CPI, this is the amount paid for every thousand qualifying impressions served at cost.
Cost per acquisition (CPA), also known as "Cost per action" or pay per acquisition (PPA) and cost per conversion, is an online advertising pricing model where the advertiser pays for a specified acquisition - for example a sale, click, or form submit (e.g., contact request, newsletter sign up, registration etc.)
Direct response advertisers often consider CPA the optimal way to buy online advertising, as an advertiser only pays for the ad when the desired acquisition has occurred. The desired acquisition to be performed is determined by the advertiser. In affiliate marketing, this means that advertisers only pay the affiliates for leads that result in a desired action such as a sale. This removes the risk for the advertiser because they know in advance that they will not have to pay for bad referrals, and it encourages the affiliate to send good referrals.
Radio and TV stations also sometimes offer unsold inventory on a cost per acquisition basis, but this form of advertising is most often referred to as "per inquiry". Although less common, print media will also sometimes be sold on a CPA basis.
CPA as "cost per acquisition"
CPA is sometimes referred to as "cost per acquisition", which has to do with the fact that many CPA offers by advertisers are about acquiring something (typically new customers by making sales).
Pay per lead
Pay per lead (PPL) is a form of cost per acquisition, with the "acquisition" in this case being the delivery of a lead. Online and Offline advertising payment model in which fees are charged based solely on the delivery of leads.
In a pay per lead agreement, the advertiser only pays for leads delivered under the terms of the agreement. No payment is made for leads that don't meet the agreed upon criteria.
Leads may be delivered by phone under the pay per call model. Conversely, leads may be delivered electronically, such as by email, SMS or a ping/post of the data directly to a database. The information delivered may consist of as little as an email address, or it may involve a detailed profile including multiple contact points and the answers to qualification questions.
There are numerous risks associated with any Pay Per Lead campaign, including the potential for fraudulent activity by incentivized marketing partners. Some fraudulent leads are easy to spot. Nonetheless, it is advisable to make a regular audit of the results.
Differences between CPA and CPL advertising
In cost per lead campaigns, advertisers pay for an interested lead (hence, cost per lead) — i.e. the contact information of a person interested in the advertiser's product or service. CPL campaigns are suitable for brand marketers and direct response marketers looking to engage consumers at multiple touch points — by building a newsletter list, community site, reward program or member acquisition program.
In CPA campaigns, the advertiser typically pays for a completed sale involving a credit card transaction.
There are other important differentiators:
. CPA and affiliate marketing campaigns are publisher-centric. Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running.
. CPL campaigns are usually high volume and light-weight. In CPL campaigns, consumers submit only basic contact information. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex. Typically, a consumers has to submit a credit card and other detailed information.
. PPC or CPC campaigns
. Pay per click (PPC) and cost per click (CPC) are both forms of CPA (cost per action) with the action being a click. PPC is generally used to refer to paid search marketing such as Google's AdSense or Ad Words. The advertiser pays each time someone clicks on their text or display ad.
Cost per click on the other hand is generally used for everything else including, email marketing, display, contextual and more.
Also, pay per download (PPD) is another form of CPA, where the user completes an action to download a specified file.
Click-through rate (CTR) is the ratio of users who click on a specific link to the number of total users who view a page, email, or advertisement. It is commonly used to measure the success of an online advertising campaign for a particular website as well as the effectiveness of email campaigns.
Click-through rates for ad campaigns vary tremendously. The very first online display ad shown for AT&T on the website HotWired in 1994, had a 44% click-through rate. Over time the overall rate users click on webpage banner ads has decreased.
The purpose of click-through rates is to measure the ratio of clicks to impressions of an online ad or email marketing campaign. Generally the higher the CTR the more effective the marketing campaign has been at bringing people to a website. Most commercial websites are designed to elicit some sort of action, whether it be to buy a book, read a news article, watch a music video, or search for a flight. People rarely visit websites with the intention of viewing advertisements, in the same way that few people watch television to view the commercials.
While marketers want to know the reaction of the web visitor, with current technology it is nearly impossible to quantify the emotional reaction to the site and the effect of that site on the firm's brand. However, click-through rate is an easy piece of data to acquire. The click-through rate measures the proportion of visitors who initiated an advertisement that redirected them to another page where they might purchase an item or learn more about a product or service. Forms of interaction with advertisements other than clicking is possible, but rare; "click-through rate" is the most commonly used term to describe the efficacy of an advert.
The click-through rate is the number of times a click is made on the advertisement divided by the total impressions (the number of times an advertisement was served):
Online advertising CTR
The click-through rate of an advertisement is defined as the number of clicks on an ad divided by the number of times the ad is shown (impressions), expressed as a percentage. For example, if a banner ad is delivered 100 times (100 impressions) and receives one click, then the click-through rate for the advertisement would be 1%.
Click-through rates for banner ads have decreased over time. When banner ads first started to appear, it was not uncommon to have rates above five percent. They have fallen since then, currently averaging closer to 0.2 or 0.3 percent. In most cases, a 2% click-through rate would be considered very successful, though the exact number is hotly debated and would vary depending on the situation. The average click-through rate of 3% in the 1990s declined to 2.4%–0.4% by 2002. Since advertisers typically pay more for a high click-through rate, getting many click-throughs with few purchases is undesirable to advertisers. Similarly, by selecting an appropriate advertising site with high affinity (e.g., a movie magazine for a movie advertisement), the same banner can achieve a substantially higher CTR. Though personalized ads, unusual formats, and more obtrusive ads typically result in higher click-through rates than standard banner ads, overly intrusive ads are often avoided by viewers.
Modern online advertising has moved beyond just using banner ads. Popular search engines allow advertisers to display ads in with the search results triggered by a search user. These ads are usually in text format and may include additional links and information like phone numbers, addresses and specific product pages. This additional information moves away from the poor user experience that can be created from intrusive banner ads and provides useful information to the search user, resulting in higher Click-through rates for this format of pay-per-click Advertising. Having high click-through rate isn't the only goal for an online advertiser who will occasionally develop campaigns to raise awareness and sacrifice click-through rate for the overall gain of valuable traffic.
In electronic commerce, conversion marketing is the act of marketing with the intention of increasing conversions, that is, site visitors who are paying customers. The process of improving the conversion rate is called conversion rate optimization. However, different sites may consider a "conversion" to be some sort of result other than a sale. One example of a conversion event other than a sale is if a customer were to abandon an online shopping cart, the company could market a special offer, for example, free shipping, to convert the visitor into a paying customer. A company may also try to recover the abandoner through an online engagement method such as proactive chat in an attempt to assist the customer through the purchase process.
The efficacy of conversion marketing is measured by the conversion rate, i.e. the number of customers who have completed a transaction divided by the total number of website visitors. Since conversion rates for electronic storefronts are usually very low, conversion marketing can be a useful way to boost this number, online revenue, and overall website traffic.
Conversion marketing attempts to solve the issue of low online conversion through optimized customer service. To accomplish this it requires a complex combination of personalized customer experience management, web analytics, and the use of customer feedback to contribute to process flow improvement and overall site design.
Conversion marketing is commonly viewed as a long-term investment rather than a quick fix by focusing more on improving site flow, online customer service channels, and online experience. Increased site traffic over the past 10 years has done very little to increase overall conversion rates so conversion marketing focuses not on driving additional traffic but on converting existing traffic. It requires proactive engagement with consumers using real time analytics to determine if visitors are confused and show likely signs of abandoning the site. Then developing the tools and messages to inform them about available products, and ultimately persuading them to convert online. Ideally, the customer would maintain a relationship post-sale through support or re-engagement campaigns. Conversion marketing affects all phases of the customer life-cycle, and several conversion marketing solutions are utilized to help ease the transition from one phase to the next.
Conversion funnel is a phrase used in e-commerce to describe the journey a consumer takes through an Internet advertising or search system, navigating an e-commerce website and finally converting to a sale. The metaphor of a funnel is used to describe the way users are guided to the goal with fewer navigation options at each step.
Using this metaphor, advertising efforts can be aimed at "upper funnel", "middle funnel", or "lower funnel" potential customers.
Typically a large number of customers search for a product/service or register as page view on a referring page which is linked to the e-commerce site by a banner ad, ad network or conventional link. Only a small proportion of those seeing the advertisement or link actually click the link. The metric used to describe this ratio is the click-through rate (CTR) and represents the top level of the funnel. Typical banner and advertising click-through rates are 0.02% in late 2010 and have decreased over the past three years. Click-through rates are highly sensitive to small changes such as link text, link size, link position and many others and these effects interact cumulatively. The process of understanding which creative material brings the highest click-through rate is known as ad optimization.
Once the link is clicked and the visitor to the referring page enters the e-commerce site itself, only a small proportion of visitors typically proceed to the product pages, creating further constriction of the metaphorical funnel. Each step the visitor takes further reduces the number of visitors, typically by 30%–80% per page.
Adding the product to the shopping cart, registering or filling in contact details and payment all further reduce the numbers step-by-step cumulatively along the funnel. The more steps, the fewer visitors get through to becoming paying customers. For this reason, sites with similar pricing and products can have hugely different conversion rates of visitors to customers and therefore greatly differing profits.
In internet marketing, conversion optimization, or conversion rate optimization (CRO) is a system for increasing the percentage of visitors to a website that convert into customers, or more generally, take any desired action on a webpage. It is commonly referred to as CRO.
Online conversion rate optimization (or website optimization) was born out of the need of e-commerce marketers to improve their website's performance in the aftermath of the dot-com bubble. As competition grew on the web during the early 2000s, website analysis tools and an awareness of website usability prompted internet marketers to produce measurables for their tactics and improve their website's user experience.
In 2004, new tools enabled internet marketers to experiment with website design and content variations to determine which layouts, copy text, offers, and images perform best. This form of optimization accelerated in 2007 with the introduction of the free Google Website Optimizer. Today optimization and conversion are key aspects of many digital marketing campaigns. A research study conducted among internet marketers in 2014, for example, showed that 59% of respondents thought that CRO was "crucial to their overall digital marketing strategy".
Conversion rate optimization shares many principles with direct response marketing – a marketing approach that emphasizes tracking, testing, and on-going improvement. Direct marketing was popularized in the early twentieth century and supported by the formation of industry groups such as the Direct Marketing Association, which formed in 1917.
Like modern day conversion rate optimization, direct response marketers also practice A/B split-testing, response tracking, and audience testing to optimize mail, radio, and print campaigns.
Conversion rate optimization seeks to increase the percentage of website visitors that take a specific action (often submitting a web form, making a purchase, signing up for a trial, etc.) by methodically testing alternate versions of a page or process. In doing so, businesses are able to generate more leads or sales without investing more money on website traffic, hence increasing their marketing return on investment and overall profitability.
A conversion rate is defined as the percentage of visitors who complete a goal, as set by the site owner. Some test methods, such as split testing or A/B testing, enable one to monitor which headlines, copy, images, social proof elements, and content help convert visitors into customers.
There are several approaches to conversion optimization with two main schools of thought prevailing in the last few years. One school is more focused on testing to discover the best way to increase website, campaign, or landing page conversion rates. The other school is focused on the pretesting stage of the optimization process. In this second approach, the optimization company will invest a considerable amount of time understanding the audience and then creating a targeted message that appeals to that particular audience. Only then would it be willing to deploy testing mechanisms to increase conversion rates.
This page was last updated January 17th, 2018 by kim
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