Optimization of online advertising campaigns in a context of different pricing models

Abstract

Online marketing is comparatively new area of advertising, but is gaining importance, as more people turning to consume media in a digital form. Year by year it quotes a growth in budgets’ ad spending and become appreciative of marketers what owe mainly to its measurability. However, Online marketing can be divided itself into few other fields like for instance Display, Email Marketing or Search Engine Marketing (SEM). Each of mentioned advertising form could be characterized with different pricing models. Advertisers pay for impressions in most online banner (display) campaigns (Cost Per Mille model), and for clicks (Cost Per Click) in SEM campaigns. Eventually, all online activity is purposed to generate an action, lead (i.e. sign-up for an advertiser’s offer and is comprised of the user’s contact information) or sale. This is the reason for come into being of performance and affiliate marketing and another pricing models focused on effectiveness of online activity. In that model advertisers pay exclusively for leads in an online lead generation campaign – irrespective of the impressions and clicks that went into generating the leads. This dissertation has a purpose in coming around which of mentioned above models or a mix of them is the most effective in conducting an online marketing campaign. For this purpose I started research with collecting information on different pricing models. Parallel with analysis of literature gathered I was collecting real campaigns data from industry that were lately analyzed and prepared for making a deterministic model for decision making that could help an advertiser. My study leads me to the conclusion that advertiser can choose between different promotional campaigns on the Internet and pricing models depending on the goal he actually has – image building or sales. Therefore, we can divide settling models into those that are exposure or revenue based. Affiliate campaigns can make the most of different models with a use of hybrid models. The most legible trend is shifting from CPM to models basing on performance. However, risk of providing results is moving in the same direction, which is included in the cost. Hence, skillful use of CPM and CPC model with constant optimization of the campaign under certain conditions could provide better results than CPA model.