Behind every advert you see online (and lot’s of content you might not realise is an advert), there’s a commercial deal that’s been struck between the Advertiser (the guy with something to sell) and the Publisher (the guy who has an audience to sell to).
The technology behind this is a mish-mash of tracking codes, ad-serving software, web analytics and offline systems but somewhere along the line money changes hands and those deals are typically agreed along one of these lines:
Tenancy Agreement: The advertiser pays the publisher a fixed sum of money for an agreed time and pays regardless of how many people see or click the ad.
Cost Per Mille (CPM): The advertiser pays the publisher an agreed amount per thousand times the advertiser’s advert is shown. Each time it’s rendered to the user is called an ‘impression’. Don’t ask why it’s in French, it just is.
Cost Per Click (CPC): The advertiser pays every time a user clicks their ad, often set on an auction basis.
Cost Per Action / Cost Per Lead: The advertiser pays the publisher not when a user buys, but when they take some action. For example a deal where a bank pays a commision for each loan application rather than for every issued loan.
Cost Per Sale: The advertiser pays the publisher only when the user buys the product. Sometimes a flat rate, but in e-commerce it’s usually a percentage of the value of a sale.
Revenue Share: For products and services where the user pays over time, the advertiser pays the publisher nothing up front but pays a percentage of the value of that customer over time.
These are the major examples of what are usually called ‘buying metrics’, more exotic examples and complicated hybrids exist, but these six are the basic tools in any advertiser or publisher’s negotiating armoury.
How does this relate to social?
Social media is often seen as an ‘organic’ medium where users filter out ‘pushy’ commercial messages, but all those servers full of drunken party pictures, tweets and videos of hilarious cats need to be paid for somehow and advertisers pay your favourite social media sites using these very same buying metrics:
LinkedIn: CPC & CPM display ads on Profile pages and the homepage
YouTube: CPC & CPM for display ads on video pages, tenancy agreements for the homepage, CPC for transparent overlays on videos and fixed fees for an advertiser to have a customised ‘brand channel’.
Facebook: CPC & CPM dispay ads around content
Twitter: Cost Per ‘Engagement’ i.e. a cost per click, retweet and CPC agreement for Promoted Tweets’
Some people might say this is a bad thing, but few people object to ads in between TV programs or in their newspaper – this is just the latest manifestation of a very old business model indeed – trading eyeballs for cold hard cash!