Online advertising metrics

Online advertising is based on a wide range of measurements, which are significantly different from traditional advertising metrics.

Metrics play a very important role in consumer advertising. They provide effective means to quantify advertising exposure to specific audiences. However, online advertising requires new approaches to developing marketing strategies and predicting results, which are very different from traditional advertising, for instance TV and radio ads. On the one hand, the metrics to which traditional media planners are accustomed are available online. Besides, calculating those metrics for a particular buy is actually quite simple. Unlike other media, every impression on the Internet is logged and reach numbers are commonly reported. On the other hand, it is much more difficult to find the necessary online data to predict advertising reach and frequency levels.

Traditional advertising metrics include three major measurements types: Audience Reach (the percentage of people within a specific universe who are exposed to a particular advertisement at least once within a given period of time), Gross Ratings Points (The Gross Impressions of a media buy divided by the population of the audience reached), Frequency (The number of times the company reached each individual who saw the advertisement), and Effective Reach (The number of individuals reached by the advertisement at a particular frequency, divided by the total number of people within a universe).

In online advertising, such measurements as Audience Reach, Gross Ratings Points and Effective Reach acquire new meaning. The calculation of Gross Ratings Points is based on the total impressions on a site divided by audience size. The percentage of users reached can be based off of the Internet Universe or total number of households. Aside from GRP, Target Ratings Points can also be calculated for a particular ad campaign. Target Ratings Points are estimated by multiplying the forecasted GRPs by the demographic composition of the site. Site demographic compositions can be obtained from website demographic data providers, such as Media Metrix, Nielsen/NetRatings, comScore, and @Plan.

Audience Reach metric measures the number of people who view the ad. In online advertising, the number of visits, unique visitors and page views for each website are easily summarized and reported. However, the major difficulty lies in predicting the accurate reach numbers, which are essential for developing efficient advertising or marketing campaign.

Measurements of effective reach allow the advertisers to calculate the percentage of users reached at a target frequency level or higher. This calculation provides data on how many users are having multiple interactions with the advertised product or service.

Typical online advertising measurements include Click-through rate (CTR), Conversion rate, Unique visitors numbers, Web site traffic data, etc. The marketer may use various online advertising payment models, including Pay per click (PPC, in which payment is based solely on qualifying click-throughs), Pay per lead (PPL, in which payment is based on qualifying leads), and Pay per sale (PPS, in which payment is based on qualifying sales). Most advertisers employ a combination of several payment models ("hybrid model").

Accurate online advertising metrics are critical for developing an efficient and predictable marketing strategy. On the other hand, to achieve more correct results, the measurements should be complemented by website demographic estimates and historical user-level frequency data, which are available from online data analysis providers.