Can someone explain the "Click through" thing

[momme]

I'm not a complete Techno-idiot but i guess I'm pretty close. Ok in a couple of posts Paul has mentioned "click through" as a way to make money for the site through the advertisers. How does this work? If i click on any of the links/ads does that count? Is it only if I buy something from the business or give my information? Do some of the ads count more than others (the big ones on top vs the little ones in the middle of threads)?
i figure i can click around some each time i'm here if that's going to help the Site out some.

Sarah

[Paul G]

Internet Advertising 101

Click through rate is the ratio of number of times an ad is displayed to the number of clicks it generates. It doesn't measure if you buy something, just if you click the ad.

There are several types of ads on the internet.

Here are the main ones:
CPM
CPC
CPA

CPM - Cost per thousands displays of the ads. M is the Roman numeral for 1,000. These ads pay based on how many times the ad is displayed. This is a basic method of advertising and was the mainstay for awhile. But now the payout rates of these have dropped to somewhere in the $.50 - $3.00 range. That means the publisher gets paid that rate for every thousand ads that are displayed. So if you are lucky to get one that pays $3.00 CPM. Every time it is displayed 1,000 times, you get paid $3.00.

The rate is determined by the targeting of the site and the click through rate the site has. So if the advertiser is trying to target a certain audience, the rate will be higher. Or if the advertiser knows that a particular site has a high click through rate they may pay more. If a site gets a targeted ad they can see rates much higher like in the $5.00-$20.00 range or more. But these are rare now a days.

CPC-Cost per click
These type of ads pay an amount for each time they are clicked. You might see rates such as $.10-.75 per click. Of course these will usually have tight bugets. Once they reach x number of clicks the ad campaign is ended. These are sometimes better for the advertiser because they can get thousands of displays with a low budget.

CPA
Cost per action
These type of ads pay only if a transaction is made after a click. The transaction can be making a purchase, signing up for a newsletter, etc. Rates on these can be very high. I've seen them $50 and over. But the chances of getting a successful transaction is very low.

Most of the ads on this site are CPM. A few of the ad networks I work with have CPC, but most are CPM.

The Google ads are all CPC. And are targeted. Google displays ads based on the keywords it finds on the page and shows ads that match that keyword.

Google has changed the way advertisers buy and pay for ads. In thier method an advertiser tells Google how much they are willing to pay per click for each keyword. They have to place these as bids. And advertisers compete to be #1 for each keyword. So there are certain keywords that are worth $50 or more per click.

This method is good for the advertiser and the website publisher. The advertiser gets to display thier ad on sites that match thier target. And publishers can make good revenue from clicks.

Here's a great Google success story:

http://adsense.blogspot.com/2005/11/spotlight-on-ask-builder.html

He makes $30k per month with Google advertising. If you read the case stuy you'll see that his site has a click through rate of 20-40%. That means that almost half of every visit results in a click of an ad. I've read that a great click through rate for ads is 1%. So he is way above the average, and is profitting for it.

So I hope that answers the question. Click throughs are important for each type of ad. Higher is always better!

But the catch is website publishers can't ask for people to click, can't have contests for people to click, etc. The clicks should be valid visits to the advertiser.

Google, in fact, monitors it very closely! And they monitor to see if a lot of clicks are coming from the same computer/person. They consider that click fraud and will ban a site for that. There are people that actually try to sabatoge sites by click thier ads too much. Many sites depend on Google as thier main source of revenue, so loosing it can be devestating!

[momme]

Paul
Thank you for the explaination. I figured there had to be some catch about just sitting and clicking links. It's actually pretty cool how well Google can match up there links to the topics. I usually find one or 2 to look out when i'm on, that look interesting.
I didn't realize there was so much to the whole advertising thing. Guess we need to keep doing research before we try and open my mom and online store.
Thanks again for the info.
Sarah

[Paul G]

Paul
Thank you for the explaination. I figured there had to be some catch about just sitting and clicking links. It's actually pretty cool how well Google can match up there links to the topics. I usually find one or 2 to look out when i'm on, that look interesting.
I didn't realize there was so much to the whole advertising thing. Guess we need to keep doing research before we try and open my mom and online store.
Thanks again for the info.
Sarah

Advertising on an online store is tricky. Epescially if you use Google's program that matchers your site's keywords. You will probably be displaying ads for you competition!

[Paul G]

Bottom line is the more clicks the better regardless of what type of ads.

That's why alot of people like using pops. They pay higher CPM's and it is a bigger ad space.