Digital Advertising is a cost effective and accountable way to advertise your business. The biggest Digital Marketing networks are Google, followed by Facebook. This has enabled businesses to reach audiences more accurately and advertisers are given more data and better targeting than ever before. But how does online advertising work? Will it help you lift your brand or help expand? To answer your question, we will first need to understand how the Ad Auction works. The Ad Auction is similar on both Search Platforms like Google and Bing, and even Social Media Platforms like Facebook, Instagram and LinkedIn. There are even Display Advertising platforms like Yahoo and Taboola.

Video Summary

Google paved the foundation for the economics of all these platforms. Hence the best place to start to understand how all of this works, is to see this video from Google:

How Google Search Ad Bidding Works

Digesting The Video

As you can see, the cost of running ads on the internet is not based on paying the highest price. The quality of your ad and the experience of the visitor are key considerations when determining ad cost. A well run campaign is not always the most expensive, but the highest quality. No one company can pay their way to the top. Users must have great experiences for any advertiser to be effective and having the highest Ad Spend costs means nothing in terms of return.

Nevertheless, well run campaigns with the correct budget will bring excellent results, whether it is SEO or PPC. However, the focus of this article is Paid Advertising.

Factors And Metrics Influencing Success

The critical determinant common across all paid efforts is Cost-Per-Click (CPC). The higher it is, the harder it is to bring a positive return. The pricing strategy your agency uses is a heavy determinant of whether you will make a profit. Higher fees do not always translate to better profits for you. We use a general 20% rule (with exceptions), where our base fee is based of 20% of Ad Spend.

Sometimes you will hear Cost-Per-Thousand-Impressions (CPM). This is a cost to deliver Display Ads 1,000 times or 1,000 impressions.

The next determinant is Cost-Per-Acquisition (CPA). This is actually a more important determinant, but normally, high CPC leads to higher CPA. CPA is the cost of acquiring the sale or lead. When your advertising is fully optimised, you will be able to have some control of this cost.

Websites are still a critical factor of how this works. A bad website reflects badly on your brand and brand perception and a bad website can really erode the trust of your business, even with high traffic. Running Lead Ads or Messenger Ads is not a long term solution. Consumers or even other businesses need to be instilled with confidence when they visit your site, or there is no point of you having your online presence. Engagement is really important, which is why “bounce rate” is so vital.

Here at Marketlytics, we have a modified bounce rate. A bounce rate is typically the rate of people leaving your web page after the first visit. However, this is not a meaningful bounce rate. What if they landed on a service page and filled out a form? There are exceptions to this rule. That is why, wherever possible we modify the bounce rate to visitors who scroll less than 40% of the web page then leave. It is a more meaningful way to record this metric. In order to do this, you need Google Tag Manager and parameters to modify Google Analytics, a highly technical task we can do.

Increase Your Chances To Achieve A Positive Return

Forecasting and projections are vital to determine potential of success on every platform, be it search or social media. We produce budget scenarios for all our clients, and they are available for lead generation in Facebook and Google, or even eCommerce situations. Wherever possible, these projections includes revenue figures to make sure we can get you positive Return-On-Investment (ROI).

In an age where we might have Tik Tok, Snapchat or even older platforms like Twitter, nothing beats a data driven, methodical approach that we do. Without the right foundation, not even marketing automation like Hubspot will save your efforts.

Budgets need to be forecasted and projected to see whether this will work. Searches need to be the right number at the right CPC for the right audience or using the right keywords, for a positive return to be made. Here are examples of our budget projections:

Are your Google Advertising goals realistic? (Numbers here are made up and not real)
Which Facebook audience and budget level is optimum? (Numbers here are made up and not real)

The options and sites you can do your advertising on is actually numerous, but fundamentals remain the same, including your offer. Customers are not silly and  your products or services need to be effective. Throwing money is not going to solve structural problems within your business. Customer discernment is at an all time high.

We work in SEM and SMM primarily, which is Google and Facebook.

We have all heard videos work better, Search can drive sales and so on, but the real picture is that it may not be so straightforward. Many times you will have to invest in more than one channel.


Online advertising does increase data received, makes it more accountable and scales at lower cost. However, companies and agencies are treating it like a lottery, when the reality is that it will take on average of three (3) months to make a positive ROI. We are data driven and methodical, and though we cannot guarantee you instant success or instant profits immediately, we will set your expectations and have you better placed to be where you need to be. How does online advertising work? With careful attention to detail and ultra diligence. Do you need a Digital Marketing Agency to help you grow?

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Which are the biggest Digital Advertising networks?

Google, which includes YouTube, followed by Facebook are the biggest Digital Advertising networks worldwide.

Will paying the highest bid get me the best placements?

As Hal explains in the Ads Auction video, all online advertising will not reward the highest bidder, but the best advertiser, all things being equal.

What are the primary metrics for advertising success?

Cost-Per-Click (CPC) or Cost-Per-Thousand-Impressions (CPM) and Cost-Per-Acquisition (CPA).

What makes your agency different from other Digital Marketing Agencies?

We are data driven, methodical, analytical, ultra diligent advertisers. We cannot guarantee you will win a lottery, but we will make you best placed to earn positive ROI.

I am a passionate and detailed Digital Marketer, running my own agency, Marketlytics in Perth, Western Australia. I specialise in Digital Advertising and I am trained in Analytics. I am a former Lawyer, International Real Estate Agent and Migration Agent, twice published in legal peer reviewed journals and sold record amounts of Australian property. Now I bring excellent results to my clients through Digital Marketing


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