Online Advertising Answers: January 2020 - The Online Advertising Guide

Welcome to the final Online Advertising Answers of 2019! Here are my answers to some of the most interesting questions I’ve been asked on Quora.

This month’s questions:

How does Facebook earn money through advertisements?
What is CPC?
How do I reduce page CTR?

Let’s get started...

To ask your own digital marketing questions, just go to our editor’s profile on Quora and ask away!

Q: “How does Facebook earn money through advertisements?“

A: “Facebook earns money through advertising by using the information its users provide and allowing advertisers to target that data.

This is different to most other advertising platforms (like Google search for example), as targeting on Facebook is almost entirely based on individuals attributes rather than what they are doing on the internet at that time.

For example on Google Search, an advertiser would target the search term someone puts in, and the ads they see would be based on that search term as well as the small amount Google can glean about that person based on their browser settings etc.

On Facebook however you don’t have to do anything except login to see ads – Facebook takes everything it knows about you (which is a lot) and then shows you an ad that people just like you are interested in.

How does Facebook know which ads to show to which people?

Facebook has algorithms working to try and classify all its users. It uses the data you provide (such as age, gender, location etc) as well as well-informed guesses to put you into as many categories as possible. It then allows people to target these categories with ads.

You can see all the categories that Facebook has put you in for advertisers here:

https://www.facebook.com/ads/preferences/edit/

You can also remove yourself from any/all of these categories.

The way this categorisation works is, for example, if you like the page for “The Avengers”, then the makers of the Justice League movies might target their ads at you, as they would reasonably expect you to be a fan of superhero movies.

However, you actually don’t have to like “The Avengers” page at all for Facebook to think of you as a fan of the Avengers. If you click an on an advert related to The Avengers, then you will still get “The Avengers” added to your list of interests in the Facebook back end.

Even more broadly than that, if you like a website that talks a lot about “The Avengers”, you would still get them listed in your interests in the back end, even if you don’t like anything that website has to say about The Avengers. Even if you followed a Facebook page called “The Avengers is a terrible set of movies” then you would still get the Avengers listed as an interest.

Facebook is just trying to find people to show ads to. If you don’t click on an ad, then it will remember that too and show that type of ad to you less.

This means there is no reason why they wouldn’t want to add you to as many categories as possible for advertisers. In fact, the more people they can say are interested in any one thing, the more advertisers they can attract.

I hope this helps,

Justin“

[This originally appeared on Quora]

Q: “What does CPC stand for?“

A: “CPC means Cost Per Click, and in online advertising, it is when someone pays for a click on an ad. CPC advertising is one of the most common forms of advertising as it is easy to understand by everyone.

How is CPC different from PPC advertising?

CPC is essentially the same as PPC (Pay Per Click) – PPC is for advertisers though, and CPC is for websites.

CPC is always lower than the related PPC however due to advertising fees and costs.

Eg an advertiser pays $2 for a click on a PPC basis. Then the services they ran the ad on takes their cut of the money (50%). Finally, the place the ad ran gets paid the rest – $1 CPC.

How to calculate CPC

To calculate your CPC, all you need to do is take the total amount spent on ads and divide by the number of clicks you received.

Click to enlarge

CPC = Money Spent ÷ Clicks

If you want to try out different scenarios, you can use this free CPC calculator.

What are the advantages of CPC advertising?

If you know what you’re doing (or are using a good ad platform), running a CPC ad campaign on your website can be very profitable. Sending ads to the pages on your site which are most likely to get them clicks means you can earn money quickly.

CPC advertising is also great because it is the one type of advertising where your goals and the advertisers are totally aligned. They want lots of clicks as efficiently as possible, and that’s what you want to give them.

If you run CPC campaigns successfully, they can be a sure-fire way to get repeat business.

What are the disadvantages of CPC advertising?

As websites only get paid when an ad is clicked, there is an element of risk involved. To get clicked on at a reasonable rate, the ads need to work well on your website. You also need to be good at optimising the ads on your site (or be using a service that does it well for you).

CPC advertising also tends not to pay that well comparatively (unless you run it really well). Also, you can be negatively affected by things outside your control such as the quality of the ads being run, or even the weather (people use the internet less on nice days!).

So should I allow CPC advertising on my site?

Yes.

For smaller sites, you probably don’t have much of a choice – if you use AdSense or a similar ad platform to monetise your site then it will run mostly CPC campaigns.

For medium-to-larger sites, if you run CPC campaigns with a frequency cap, they can take up relatively little inventory on your site, and earn you extra money from your worst pageviews.

How to tank your Page CTR!

Make an untrustworthy webpage or website. People are less likely to click on ads if they feel like they are being scammed.
Stuff your page with loads of ads. If you put too many ads on a page, you are just asking for your userbase to use ad blockers, and then you’ll get fewer clicks than you ever dreamed of. More than 5 ads per page will probably do it (and pop-ups – people hate pop-ups).
Place your ads below the fold. Ads which are above the fold perform better as more people see them and are therefore more likely to click on them. So if you want a lower Page CTR for some reason, put them below the fold and you’ll get far fewer clicks!
Keep showing ads to your users that you know don’t work. CTRs generally don’t change that much when you show them to the same audience (in fact they will drop slightly over time). So find a set of ads that performed badly and show them forever!
Only allow still image ads, and only from disreputable advertisers. Animated ads and video ads perform much better than static ads, so avoid these at all costs if you want them to perform badly. Also, advertisers with bad public reputations will obviously turn people off, so allow as many of them as possible.
Allow ads to auto-play sound and video, and don’t include a close button. Ads which are mega-annoying will drive people away from your site, so this is a double-edged sword. You will likely reduce your overall page impressions if you allow this level of annoying ads, but people will have to load your page at least once to be annoyed by it, so that will drop your Page CTR overall.
Buy in fake traffic. Fake traffic won’t interact with your site (or ads), but will boost your page views.
Have broken ads which can’t be clicked on (or which don’t properly record clicks). Then even if people do click on your ads then it won’t increase your Page CTR.
Don’t put any ads on your site. If there is no ads to click on, then there can be no clicks.

In conclusion

Apologies for the sarcasm. Don’t try to reduce your Page CTR, it doesn’t make any sense as a goal.

Thanks/sorry,