This article is the fourth in The Anthill Guide to Online Marketing for Small Business (and Startups) series. Last time, we identified common terminology associated with online marketing and revealed how some websites artificially inflate Page Impressions. Today, we continue this theme and look more deeply into the science of online advertising, so that you may talk like an expert, and get ROI!

How to talk like an expert, then get ROI

Now that we’ve set you up with the terms (and tricks) to help you avoid getting burnt, let’s get back to the options — namely, the advertising options — and confront the painful topic of ROI.

I call it ‘painful’ for two reasons.

Firstly, because many marketing professionals still don’t know what this extremely important three-letter-acronym (TLA) actually means. They do their best to meet the needs of their clients or employers but never get the respect they believe they deserve.

Why? Because they fail to measure outcomes in a way that will impress a cool-headed CEO.

To help out this misguided majority (yes, in my experience, the majority of marketers and new business owners don’t understand the meaning or importance of this term), ROI stands for Return-On-Investment.

It simply means that if you spend one dollar on advertising, you better get at least one dollar and one cent back. (This example equates to a 1% ROI).

Secondly, I call it ‘painful’ because getting a clear and attributable ROI from marketing has traditionally been bloody hard.

For a long time, marketers could not accurately measure the outcomes of their marketing activities. Now that they can, many are flummoxed. It’s an awful thing to suddenly be accountable for your actions after so many years of carte blanche spending on ‘brand building’ exercises. (Yet, why am I not sad?)

Small business owners and startups don’t have the luxury of wasteful marketing (i.e. anything that is not going to deliver an immediate return).  In fact, smart business builders base their ROI calculations on profits generated rather than revenues.

For example, if I sell a product for one dollar, yet it costs me fifty cents to produce, I will earn a fifty cent profit from its sale. Therefore, if I spend one dollar on advertising, I’d better sell at least two units ($0.50 + $0.50 = $1.00) to break even. (This example equates to a 0% ROI).

That is ROI in its simplest form. Never forget it.

The purpose of marketing is to bring in more profit from the marketing exercise than what the exercise costs. This instalment will set the framework for achieving such an outcome.

But first I have an important confession (and disclaimer) to make.

Unlike other articles in the series, where I have been able to share real and actionable examples based on our own experiences at Anthill, the subject matter of this particular article crosses into areas that prevent me from being able to take such an approach.

This is because several of the advertising options described in the article are available for sale on the Anthill site and it simply proved too difficult to talk explicitly about our experiences without the article sounding like one, big long ad (for Anthill).

As such, I’ve tried to be as direct and transparent as possible. In fact, I even caution against some of our advertising options (namely, banners for small customers).

But the main downside for readers is that I don’t have too many compelling yarns to include. To compensate, I’ve added two quite remarkable revelations (and some groovy heatmaps).

Despite its shortfallings, this instalment is, nonetheless, absolutely vital to the series and will, hopefully, prompt action (if you haven’t already started following the advice provided in its articles so far).

So, let’s get cracking!

What is display or banner advertising?

In my previous article, I mentioned that online advertising usually takes three forms:

1. Display advertising (banners)
2. Classified advertising (directories)
3. Text Promotions (Text Links)

Display advertising online is an option that most readers will already be familiar with. It can involve some amazingly creative executions, from rotating and video embedded banners to entire ‘site-skins’ (where the website is given a ‘theme’ to communicate the advertiser’s message).

Once again, it’s worth mentioning that, even in this reasonably established realm of online marketing, different and strangely conflicting terms are also used. For the purposes of simplicity, I’ll be sticking to banner advertising, and will use the terms ‘banner’ and ‘display’ advertising interchangeably.

I’ll also be proposing that banner advertising, in its current form, is perhaps the least effective option available for small business owners and startups. And here’s why.

Does banner advertising actually work?

We are currently at a point in the evolution of banner advertising where nobody yet knows the most optimal size, dimension, position for generating any specific result.

I have already described the ‘arms race’ that has evolved around Page Impressions (PIs) as the dominant currency for banner advertising. Some online marketers advocate Unique Browsers (UBs) as a better metric for selling banner advertising, while others champion Engagement or a combination of Engagement and UBs.

In fact, the only aspect of banner advertising that online marketers seem to agree on is that banner advertising is usually employed for two purposes:

1. To raise awareness of a brand; and/or,
2. Generate ‘click-throughs’ to a specific online destination.

Some creative professionals are now also embedding forms into the ads themselves, adding a third purpose – online registrations. (These people would approve of the first article in this series.)

Does banner advertising raise brand awareness?

If your goal is brand awareness, banner advertising is still widely considered a highly effective online advertising option (in the same way that a billboard or bus-shelter advertisement can be highly effective at attracting attention).

Unfortunately, as my introduction infers, brand awareness is still not easily measurable and, therefore, not a particularly solid strategy for SMEs (in the same way that billboards and bus-shelter ads are also not practical for your average SME).

If you have the resources to conduct widespread surveys (or simply observe an increase in site traffic), you may be able to say that your banner campaign was a success. But do you remember the old saying shared in the first article of this series?

“I know that half my advertising works. I just don’t know which half.”

It is almost impossible to know ‘which half’ of your advertising works if it is entirely based on banner advertising for the purpose of raising brand awareness.

Does banner advertising generate click-throughs?

The second purpose of banner advertising is to generate clicks (i.e. ‘Click-Throughs’).

However, there are now plenty of surveys and reports littering the internet (some more credible than others) which suggest that only a certain type of person ever clicks on banner advertisements. The rest could be said to have acquired ‘banner blindness’.

Usability doyen Jakob Nielsen has spent many hours testing out how humans really behave online, often in conflict with the ways we think we behave. He releases a regular email newsletter that is packed with well researched facts about website usability.

For example, in 2007, he posted a study that confirmed, that there are three design elements that are most effective at attracting eyeballs:

1. Plain text;
2. Faces; and,
3. “Cleavage and other private body parts.”

Why am I not surprised?

However, in this same study, Nielsen did present some extremely compelling heatmaps to demonstrate where readers look.

Banner Advertising Heatmaps

The areas where users looked the most are coloured red. The yellow areas indicate fewer views, followed by the least-viewed blue areas. Green boxes were drawn on top of the images after the study to highlight the advertisements.

The images don’t need much explanation.

Once again, you, me and the industry at large are all still exploring the options. And these type of reports probably have as many detractors as they do supporters.

So, where does Anthill stand?

From our position, observing visitor behaviours on our own site, we believe that banner advertising is only effective for a small few.

Yup. There, we’ve said it (the first of two big revelations for this post).

This might seem like an absurd thing for the owner and publisher of a website that sells banner advertising to say. However, to clarify this observation, we believe that banner advertising is flawed as a ‘stand alone’ strategy.

If you want to burn your entire budget on banners, you’d better have a pretty amazing ‘call-to-action’ supported by some pretty amazing creative. Or you better have followed the advice we’ll be offering in a later instalment of this series on conversion.

Otherwise, we have observed, banners alone simply don’t work in comparison to the alternatives (based entirely on Anthill’s site activity).

However, there is one caveat.

And it’s an important one.

When used in conjunction with other activities (such as email and site sponsorship), we have watched the placement of banners dramatically increase the click-through rates of the associated activities. The banner click-through rates hardly change but the associated activities generate a higher number of ‘actions’ (like click-throughs).

This is widely recognised as an outcome (and the main benefit) of what is called ‘frequency’. The more times you see a message and/or brand, the more likely you are to become familiar and, therefore, comfortable with the message and/or brand.

This becomes the foundation of trust and can influence your decisions elsewhere.

We have several repeat advertisers which place banners with us. Their click-through results are high in comparison to other sites (largely because we don’t use auto-refresh) but the more compelling reason for placing these ads is that they augment response rates to other activities — such as email advertising and Text Advertisements.

Our conclusion is that banner advertising should be avoided, unless run as part of a larger, concentrated campaign. And because large and expensive campaigns are rarely an option for SMEs and startups, we think this option should be avoided as a matter of course.

The good news is that the more affordable options available to SMEs and startups could also be the more effective, such as Directories and Text Advertising.

Common banner advertising dimensions (a short diversion)

Whether or not you decide to pursue this type of advertising (based on our comments above), it still pays to know the terms and common options.

Once again, it would be impossible to create a definitive list. So, here are some of the most popular, as defined by the Interactive Advertising Bureau (IAB).

The Interactive Advertising Bureau (or IAB) is a US organisation that develops industry standards, conducts research, and provides legal support for the online advertising industry.

Business Directories: Classified advertising online

Now that you know just about all there is to know about banners, let’s consider two of the most popular alternatives, starting with Business Directories.

There is very little to say about this online advertising option that is not already familiar to most small business owners and startups. This is because most mirror their print counterparts, in traditional media.

The process is simple. You choose a marketplace where your target market congregates (to buy cars, sell houses etc) and post your advertisement. For example, Anthill has its own directory for people who wish to promote services to business builders. (It’s called the antPAGES. And that’s the only plug it will get in this post, I promise.)

However, in the online world, business directories have two distinct advantages:

1. Some online directories affect your search engine optimisation results.
2. Some embrace the concept of ‘friend recommendations and ‘the social web’.

Online Directories and SEO

The first feature, search engine optimisation (SEO) outcomes, is best left to another day. In fact, SEO will be addressed in an article dedicated specifically to this topic later in this series.

For now, however, I will simply say that almost every web-page on the internet has a PageRank, which determines how close to the top of search engines, like Google, this web-page appears.

A page earns its PageRank based on a number of factors. But the two most important involve backlinks, specifically the number of other pages linking back to the web-page and the quality of these pages linking back.

‘Quality’ refers to the linking page’s PageRank. Backlinks from pages with a high PageRank improve the destination web-page’s own PageRank, enhancing its status on search engines.

Got that? If not, don’t worry. We’ll return to this topic later.

The takeaway, however, is that some Business Directories with a high PageRank can improve your PageRank on search engines by providing a quality backlink.

This is a benefit worth seeking out, with one important exception.

If you come across a Business Directory that promotes link sharing, you may wish to have a scout around Google to see whether the site is credible. Getting involved in ‘Link Farms’ and other link sharing sites is frowned upon by search engines, like Google, and can undermine your ranking, with dire consequences.

Online Directories and the Social Web

The second feature refers to the rise of recommendation tools, such as the Facebook icon or the Tweetmene button you will see at the top left of this article.

It’s now well known that consumers are making more and more of their purchasing decisions based on social media recommendations, rather than traditional advertising. We’ve written about this elsewhere, under the headline: Hidden Pizza Restaurant reveals not-so-hidden flaws in Yellow Pages’ digital strategy.

This makes sense. Word-of-mouth has always been one of the most effective tools available to marketers.

As such, some Business Directories now incorporate social recommendations into their listing platforms. This is also a benefit worth exploring, as recommendations attract sales and incoming links (which can also improve a site’s search engine ranking by adding to the number of backlinks in a way that search engines, like Google, approve of.)

Again, this is a topic for another, future post in this series, dedicated to social media.

But for the record, Anthill’s antPAGES Business Directory currently lacks this latter feature (social recommendations). However, we are working on it! (So, there’s no need to give me grief about it in the comments below. And I hope this acknowledgement of a weakness won’t be construed as a plug, as that would negate my promise above!)

Text Advertising: What is it?

It’s now time to consider the third option for consideration in this article: Text Advertising.

You may have heard of Text Advertising, Text Promotions and Text Links. They are, ostensibly the same thing (and not to be confused with SEM).

The simplest way to explain the former is to refer you to the block advertisement at the foot of this article (and above right). Can you see it? It’s a shaded square with the words ‘Want an ad like this?’ in its top right hand corner.

(Okay, that is a plug. But a soft one!)

Text advertising is usually just that: Text placed on a website (or email) with a link directing an advertiser’s target market to a destination site. That’s why they are also often referred to as a Text Link or Text Promotion.

If you ‘refresh’ this page, you will note that the text advertisement at the foot of this article will change. You should also notice that some of the various advertisements, as they rotate, have a more effective ‘call-to-action’ – a more compelling offer – than others.

Naturally, as I’ve said before, the success or failure of any promotion is entirely dependent on the nature of the offer. Some offers you will find more compelling than others.

Some will be more ‘retweetable’.

In addition to providing an opportunity to present a compelling offer (and generate ‘click-throughs’), some text advertisements, once again, have the added benefit of improving the destination site’s search engine ranking (for the reasons mentioned above and destined to be explored in greater detail in a later article).

They also do not involve design costs, which can be a burden for your average SME.

But the real benefit of Text Advertising is that it has been proven to overcome banner blindness. (This is the second revelation promised earlier.) In a moment, I’ll show you how.

What is search engine marketing (another short diversion)

Before I share how it might be possible to overcome banner blindness, it’s worth very briefly mentioning Search Engine Marketing (SEM). However, SEM is not a planned topic of the series.

Indeed, it is one of those subjects where readers would be better served by undertaking their own research elsewhere. Effective Search Engine Marketing has almost become a ‘specialist art form’. Industries have grown around it.

However, I do promise that the principles that lie at its heart will be explored in a later post in this series dedicated to Facebook and other social media tools.

Why? Because, in my opinion, many small business marketers would be better served exploring Facebook advertising options over those available via search engines. Plus, the principles required to succeed with Facebook advertising can also be easily applied to the main forms of SEM.

Let’s just say, SEM products are the very modest, two-line text advertisements that you can see at the top or right hand side of a search engine. The most common SEM product is Google Adwords. Bing also offers its own SEM product, as does Yahoo!.

So, how does Text Advertising cure banner blindness?

Well, it doesn’t.

Rather, it exploits our desire to avoid banners by tricking us into reading advertisements – fooling us into temporarily believing that we are reading editorial content.

I’ve already revealed that the three design elements that are most effective at attracting eyeballs are plain text, faces and cleavage (and “other private body parts”s).

According to Nielsen’s research, Text Advertisements generate a far greater number of eye-ball fixations than display banners. We can also confirm that we have tested this first option here at Anthill, and Nielsen is spot on. (We haven’t yet found an excuse to test the third option yet. But, rest assured, several members of the Anthill crew have formed a think-tank and are working day-and-night on the case, at serious risk of going blind.)

Text Advertisements generate a far greater number of click-through responses too.

So, why is this happening?

Aside from tricking us, this outcome could also be because Text Advertisements have one very obvious advantage.

Being forced to express a message in a few words concentrates the advertiser’s mind, and probably leads to clear and compelling ads that are better focused on explaining how users will benefit from the product or service.

We’ve said it before. The absence of a compelling message — ignoring the users’ immediate needs — is certain death online. Make your message retweetable!

The text-only format more clearly exposes content-free messages as useless and thus might save advertisers from the bad instincts they honed on old media.

After several years of watching behaviours online, one clear conclusion is that online users live in the moment. Giving users exactly what they want, right now, is the road to online success, and having to write small boxes of text encourages advertisers to acknowledge this mindset and think like the customer.

It’s also worth noting that Business Directories work in a similar way, because as far as users are concerned these advertisements are content, not advertising. People actively seek out the classifieds when they are looking to buy.

So, by and large, the effects of banner blindness don’t apply to Business Directories either.

How to get ROI from online marketing

Okay, it’s time to get serious!

In the first article in this series, I proposed a number of ways to measure traffic, registrations and sales. In my most recent article, I also explained some of the terms that are used in the online advertising world.

This is your chance to bring these two lessons together and, hopefully, achieve the holy grail of all forms of business development… Return-On-Investment.

(Cue gospel choir and beams of uplifting incandescent light.)

Measuring reach and awareness

Whatever the method you decide to use — whether you employ banner advertisements, Text Advertising, Business Directories, Email Advertising, SEM, Facebook ads or even free social media — it is first essential that you keep an eye on the most relevant metrics to reflect your goals.

You can’t improve what you can’t measure, right?

If you are interested in generating broad awareness for your brand and getting reach, you’ll probably be most interested in:

Total Page Impressions served during the campaign

EXAMPLE: NICHE VS MAINSTREAM

Let’s say that you intend to run some banner advertising to test an offer.

You have $3,000 to spend, so you decide to purchase 10,000 Page Impressions (PIs) at a Cost-Per-Thousand (CPM) rate of $50 from a Niche Site and an additional 250,000 PIs from a Mainstream Site at the much cheaper CPM rate of $9 (larger sites rarely offer small packages). Those two options will set you back $2,750 plus GST.

The campaign runs for a week and ends up looking like this:

Campaign One: Niche Site Purchase: 10,000 PIs Campaign Cost: $500 CPM: $50

Campaign Two: Mainstream Site Purchase: 250,000 PIs Campaign Cost: $2,250 CPM: $9

Therefore, if the goal of the campaign is to generate brand awareness, the Mainstream Site is clearly the more effective option. At a glance, more people saw the banner advertising for less money.

However, as we already know, a site with its ‘auto-fresh’ code switched on can artificially inflate its Page Impressions by 800% (at least), without increasing the number of Unique Browsers (UBs) likely to view your ad. Therefore, it’s also worth establishing whether a site uses auto-refresh codes as this will undermine the result.

Comparing PIs with Click-Throughs

But what if your goal is to prompt Click-Throughs to a destination page? If your goals involve site visits and registrations, you’ll probably be more interested in:

Total Click Throughs served during the campaign

EXAMPLE: NICHE VS MAINSTREAM (cont.)

Using the example provided earlier, we can take our analysis one step further.

Campaign One: Niche Site Purchase: 10,000 PIs Campaign Cost: $500 CPM: $50 Click Throughs (#): 50 Click Throughs (%): 0.1% Cost per Click: $10.00

Campaign Two: Mainstream Site Purchase: 250,000 PIs Campaign Cost: $2,250 CPM: $9 Click Throughs (#): 180 Click Throughs (%): 0.08% Cost per Click: $12.50

If the goal of the campaign here is to prompt Click-Throughs to a destination page, the Niche Site clearly outperformed, costing less per Click Through.

What if you’re seeking sales?

This next level is where sophisticated online marketers earn their stripes.

This is where employees make fans of the employers and where businesses owners can take their businesses forward in huge leaps and bounds.

If your goal is to, ultimately, sell a product or service, you would also be well-advised to monitor outcomes such as:

• Total Coupons requested during the campaign
• Total Leads generated during the campaign
• Total Sales generated during the campaign

The first two items are easy to measure (especially if you have set up Google Analytics, as suggested in the first article). However, unless you sell products or services online, the data for the last item (i.e. sales) might need to be sourced from records beyond the online tools at your disposal, such as company sales reports.

This is particularly true if you work in retail (where sales are made on the shop-floor), a service based industry (where the sales process involves one-on-one interactions) or for a company that sells big-ticket items, which customers are unlikely to purchase on the web.

Sourcing defensible data in such circumstances can prove difficult.

But it is rarely impossible.

EXAMPLE: RETAIL SALES

Let’s say you run a boutique retail store and wish to know how many people were prompted to visit your store as a result of your online marketing efforts.

One way to track the effectiveness of your campaign might be to offer a redeemable gift or a Coupon. That way, you can measure the commercial value of the campaign against the cost.

For example, if a $1,000 campaign prompts 300 Coupon downloads, driving 100 people to visit your store, prompting 50 purchases, each generating a $50 margin and, therefore, a total profit of $2,500, you’ll be able to shout your shop staff Friday bubbly, secure in the knowledge that your $1,000 campaign generated a 150% ROI.

You might want to read this last paragraph again if maths aren’t your strength.

But what if you sell a service that requires a complicated and/or lengthy sales process?

EXAMPLE: B2B SALES

Let’s say you sell web-development packages, ranging from $5,000 to $50,000.

These are the types of products that people are unlikely to purchase online using a credit card. The sales process requires a degree of ‘hand-holding’. One way to track the effectiveness of your online campaign is to offer a free item of “High Perceived Value” (such as an education product likely to be of interest to your target market).

For example, if a $1,000 campaign prompts 100 registrations for your free eBook online (eCourse, Fact Sheet, Quote Calculator, etc), providing the contact details for 100 leads for your sales staff to follow up, prompting 60 telephone consultations, 20 face-to-face meetings, 10 personalised quotes and two new sales at $5,000 each, you can shout the sales crew a weekend team bonding exercise in the Hunter Valley, secure in the knowledge that your campaign generated a $900% ROI.

These scenarios are provided to demonstrate how an online marketing sales funnel can be added to an existing business. However, you will need to run your own calculations to reflect your own circumstances.

How can I generate sales online. I work in a knowledge industry?

When I’m out and about talking to business owners, this second set — the service provider — is always the fastest to make self-perpetuating claims like, “Online marketing won’t work for my business because I sell knowledge. I’m a consultant.”

However, it’s my (tested and proven) opinion that knowledge-based industries are at a distinct advantage when it comes generating business online, simply because businesses that provide knowledge for a living already have the tools at their disposal to create cheap (from their perspective), highly retweetable, offers of ‘high-perceived value’.

Of course, I’m referring to something like a free education product, such as a Fact Sheet or eCourse. Naturally, the cost to the customer is a name, email address and phone number.

If you want an example, you are reading such an education product right now. The only difference is that this campaign was created for the purpose of capturing email addresses and encouraging site traffic, rather than collecting leads to feed a sales team.

This eCourse cost us nothing to create, other than knowledge and time. (And, in the not too distant future, you’ll get to read how this campaign has performed against our measurable goals.)

If you’re still not convinced, here’s the clincher.

Even if your chosen campaign does not meet your expectations — if it does not prompt enough click-throughs, trigger coupon downloads, generate leads or deliver the wrong type of leads — at least you’ll know. And quickly.

Unlike traditional advertising, where you might spend months waiting to discover whether (or not) that magazine advertisment struck the right cord or whether that radio advertisement really did prompt a bump in retail sales, you will know within days whether your campaign is kicking-goals or has fallen flat.

And sometimes a clear understanding of why a campaign didn’t work can prove more valuable than the outcomes the campaign was initially devised to pursue.

Sometimes it’s better to spend $500 now to avoid wasting $5,000 later. When marketing online, very quickly, you should be able to see trends and make educated predictions about the number of people you will need to reach in order to generate enough reactions to achieve ROI.

Remember the anecdote I shared in the first article in this series, where I explained how Anthill increased subscription sales 800%? That would never have been possible, unless we had put the tools in place to measure what we were doing wrong!

Finally, it’s worth mentioning that these rules can equally be applied to other forms of online marketing, such as email advertising and social media. The channels might have changed but the same rules apply.

What’s the moral of this tale? We’re back at measurable.

In this article, we considered the most common forms of online marketing: The purchase of advertising in three forms. Hopefully, you will now feel better informed should you wish to purchase any of these channels (or those closely associated).

But, once again, we return to the two themes of the previous three articles, making sure that the campaign involves a compelling offer to reflect the interests of your target audience and can be measured to reflect the commercial goals of your organisation.

Actions for Online Marketing (week three)

Find a cheap, targeted community:

There’s no better way to learn than by doing. If you want to promote, for example, pet products, find a targeted pet site. If you want to sell solar panels, find a targeted community built around ‘green’ news and sustainability. Even if you want to sell something as niche and specific as sandpaper, for example, it’s likely that’s there exists a community for carpenters waiting for your participation.

Dip your toe in the water:

If the community offers a cheap directory, that’s often a good place to start. The rewards might not be great but either will the risk. And you can use this exercise as an excuse to set up your tracking tools (Have you set up Google Analytics yet?) before embarking on larger more expensive campaigns. This point is vital: Don’t spend big until you have systems in place to measure the outcomes.

Then, you can start to get more adventurous:

If the desired site offers Text Advertising, check out the options. If it’s not too expensive, test using the measurement tools you now have in place. If the site has Banner Advertising, offer to buy a small number of banner ads on a CPM basis (i.e. If the CPM is $30, perhaps buy 10,000 for $300). But remember, if you’re buying Page Impressions, check to see whether the site is not being inflated. If you are buying advertising at a fixed rate, make note of the likely number of Unique Browsers you’ll be likely to reach. That way, you can make a calculated guess as to the percentage of click-throughs you’ll need to get you your ROI.

Next time…

Over coming weeks, this series will address…

• Search Engine Optimisation: Why you don’t need to be a tech-geek to get it right
• Social media: How to empower your customers to do your marketing for you
• Using email to get cut-through and click-through: Web’s ugly sister
• Masterclass: Why small business should become the next media barons
• Checklist & Tools Summary

Image by Jonty Wareing