Internet Marketing Jargon

In our article last month we offered advice on avoiding the hype of Internet marketing. As promised, this month we explain some of the terms used by those trying to get you to spend your money.

One of the distinct advantages of Internet marketing over traditional advertisements is the ability to gather information about visitors to your site. Provided you ignore any marketing hype (see the first example below), it is possible to create different marketing campaigns and then set benchmarks against which to assess their relative costs and effectiveness.

Statistics

Hit
Hits are a poor and most often misquoted method of measuring web site traffic. A 'hit' is registered each time a browser request is made from a web server. Thus, if you have a web page containing ten graphics, each page display will count as eleven hits (the page and the graphics). To illustrate the point, we were recently asked to comment on a client's proposal to advertise through a site which claimed 200,000 visitors over an 8-month period. The truth was that the site had a lot of pictures and the actual number of visitors was around 4,000 – a big difference when making advertising decisions.

Impression
The number of times a banner or advertisement is displayed on a web site. If 10 people visit the web page containing the banner, you would have 10 impressions. If one person viewed it 10 times, you would still have 10 impressions.

Page View
This is a far more effective way to measure web traffic. A Page View refers to each time a page is displayed. So, if you have a web page with ten graphics, each time the page is displayed counts as one page view but eleven hits. 

Unique Visitors
This gives the number of different individuals who visit your site in a given period. So if 50 people visit your site that is 50 unique visitors, but if one person visits your site 50 times, that is one visitor.

Stickiness
Stickiness is the length of time that a visitor spends at your site over a given period of time. Sometimes, the figure will relate to the number of web pages that your visitors typically download.

Ratios & Benchmarks

CAC (Customer Acquisition Cost)
This is the cost of obtaining a new customer. You divide your total acquisition expenses by your total number of new customers. For example, if you spend £300 on an advertisement which produces 30 new customers, your CAC is £10. 

CTR (Click Through Ratio)
The number of people who click on a link or banner to get more information compared to the total number of people who have seen it. If 3 site visitors out of 100 click through a banner, you have a CTR of 3/100 = 0.03 (or 33:1 or 3%). Typical CTR's are around 2%; getting a rate up to 5-6% is pretty good.

Conversion Rate
This is the percentage of visitors to your site who take the action that you would like, for example: buy something, register, ask for information etc. Since everything has to have a TLA (work that one out!), Conversion Rates are referred to as the MWR (Most Wanted Response). Thus if 5 out of 100 unique visitors perform your MWR, the conversion rate is 5/100 or 5%. (In the example used under Hits, the Customer Acquisition Costs would have been very different using the same conversion rate with 200,000 targets versus 4,000.)

Advertising Charge Models 

CPT or CPM (Cost Per Thousand)
An advertising model based on the cost of 1,000 impressions of your web advertisements. If a publisher is selling advertising for £45 CPM, you would pay £45 for one thousand impressions of your advertisement, or .045 pence each per impression.


CPC (Cost Per Click)
This is the cost of attracting a visitor to your web site and is the most common form of advertising. You calculate the CPC using the following formula: CPC = CPM/(CTR x 1000) In other words, if you paid £45 CPM for a banner ad with a conversion rate of 2%, your CPC would be £45/(.02*1000) or £45/20 = £2.25). Each site visitor is costing you £2.25. Note: this is cost per visitor – not cost per sale.

PPC (Pay Per Click)
Payment is based on qualifying click-through's. The publisher delivers your advertising material to qualified viewers. You are charged for each one that clicks through the ad. The advantage of this model is that you are only paying when the viewer does click-through – not every time the ad is displayed. In other words, you are getting closer to the Most Wanted Response. (Take a look at Google Select Ads – these are a great way to see how the system works and allows you to try different keywords to see how responses differ.)

PPL (Pay Per Lead)
Payment is based on qualifying leads supplied. For example, a client may pay you a set amount for each visitor you send who subsequently requests information, such as a quotation.

PPS (Pay Per Sale)
Payment is based on qualifying sales. For example, a client may pay you commission for each qualified sale that results from your activities. Affiliate programmes typically operate in this manner.


We hope that this paper has explained some of the expressions used in Internet marketing. Don't forget the expression: "Lies, damn lies and statistics", and the next time that you read that a web site has had over a million hits you will know all might not be what it appears!

 

This article was written by Bernie Vincent of The Eminent Trading Company Limited

Email: bernie@ebusiness-gateway.co.uk 

© The Eminent Trading Company Limited 2002-2003.

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