Examples of online advertising include contextual ads on search engine results pages, banner ads, blogs, rich media ads, social network advertising, interstitial ads, online classified advertising, advertising networks, dynamic banner ads, cross-platform ads and e-mail marketing, including e-mail spam. Many of these types of ads are delivered by an ad server.
History of online advertising
Online advertising began in 1994 when HotWired sold the first banner ads to several advertisers. Revenue in the United States grew to an estimated $7.1 billion in 2001 or about 3.1 percent of overall advertising spending. The dot-com bust destroyed or weakened many of the early online advertising industry players and reduced the demand for online advertising and related services.
The industry regained momentum by 2004 as the business model for “Web 2.0” came together. A number of businesses emerged that facilitated the buying and selling of advertising space on web pages. Entities that operated web portals settled on the traditional “free-tv” model: generate traffic by giving away the content and sell that traffic to advertisers. Most web sites, with the exception of transaction ones such as eBay, generate the preponderance of their revenues from the sale of advertising inventory—the eyeballs that view space allocated for promotions—to advertisers. In the first half of 2007 alone, advertisers in the US spent more than $10 billion advertising on websites. That was about 14 percent of all advertising spending.
The portion of advertising that is done online will increase significantly over time as more devices such as mobile telephones and televisions are connected to the Internet and people spend more time on these devices. The valuations that the capital markets are placing on businesses related to online advertising are consistent with this prediction. Google has had a seven-fold increase in its market value from August 2004 when it was valued at $29 billion to $215 billion in December 2007. During 2007 several companies in the online advertising market were purchased at multiples of 10-15 times annual revenues.
The online advertising industry burst into the public eye in 2007. Google’s sky-rocketing stock price and its forays into industries such as word processing software, online payments, and mobile telephones drew significant attention. More than 500 articles on Google appeared in the New York Times, Wall St. Journal and the Financial Times during the year. The U.S. Federal Trade Commission and the European Commission launched in-depth antitrust investigations into Google’s acquisition of DoubleClick, which provides software technology and services to online advertisers and publishers. Privacy concerns also came to the fore in 2007 as consumers, government agencies and the media started focusing on the massive amount of personal data that online advertising companies were storing and using.
Businesses began to move their advertising efforts into areas by making wide use of social media from 2009. The social media includes social networking tools such as Facebook, Twitter, Hi-5, social news tools such as Reddit, Digg Propeller, social photo & video sharing tools such as Photobucket, Flickr, YouTube and social bookmarking tools such as Del.icio.us, Simpy. One of the advantages of social media advertising is proper targeting of market through the use of the users’ demographic information provided. The disadvantage is measuring effectivity of social media advertising, whether or not the number of ‘likes’, ‘friends’ or ‘follows’ could convert to actual sales.
Competitive advantage over traditional advertising
One major benefit of online advertising is the immediate publishing of information and content that is not limited by geography or time. To that end, the emerging area of interactive advertising presents fresh challenges for advertisers who have hitherto adopted an interruptive strategy.
Another benefit is the efficiency of the advertiser’s investment. Online advertising allows for the customization of advertisements, including content and posted websites. For example, AdWords, Yahoo! Search Marketing and Google AdSense enable ads to be shown on relevant web pages or alongside search results.
The internet has become an ongoing emerging source that tends to expand more and more. The growth of this particular medium attracts the attention of advertisers as a more productive source to bring in consumers.
A clear advantage consumers have with online advertisement is the control they have over the product, choosing whether to check it out or not.
Online advertisements may also offer various forms of animation. In its most common use, the term “online advertisement” comprises all sorts of banner, e-mail, in-game, and keyword advertising, including on platforms such as Facebook, Twitter, and MySpace. Web-related advertising has a variety of ways to publicize and reach a niche audience to focus its attention to a specific group. Research has proven that online advertising has given results and is a growing business revenue. For the year 2012, Jupiter Research predicted $34.5 billion in US online advertising spending.
Types of Internet marketing
Internet marketing is broadly divided into the following types:
- Display advertising: the use of web banners or banner ads placed on a third-party website or blog to drive traffic to a company’s own website and increase product awareness.
- Search engine marketing (SEM): a form of marketing that seeks to promote websites by increasing their visibility in search engine result pages (SERPs) through the use of either paid placement, contextual advertising, and paid inclusion, or through the use of free search engine optimization techniques also known as organic result.
- Search engine optimization (SEO): the process of improving the visibility of a website or a web page in search engines via the “natural” or un-paid (“organic” or “algorithmic”) search results.
- Social media marketing: the process of gaining traffic or attention through social media websites such as Facebook, Twitter and LinkedIn.
- Email marketing: directly marketing a commercial message to a group of people using electronic mail.
- Referral marketing: a method of promoting products or services to new customers through referrals, usually word of mouth.
- Affiliate marketing: a marketing practice in which a business rewards one or more affiliates for each visitor or customer brought about by the affiliate’s own marketing efforts.
- Content marketing: the process of creating specialized content such as infographics, blog articles and ebooks to attract more customers.
- Inbound marketing: involves creating and freely sharing informative content as a means of converting prospects into customers and customers into repeat buyers.
- Video marketing: This type of marketing specializes in creating videos that engage the viewer into a buying state by presenting information in video form and guiding them to a product or service Online video is increasingly becoming more popular among internet users and companies are seeing it as a viable method of attracting customers.
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Internet marketing is associated with several business models:
- E-commerce: a model whereby goods and services are sold directly to a consumer or business.
- Lead-based websites: a strategy whereby an organization generates value by acquiring sales leads from its website. Similar to walk-in customers in retail world. These prospects are often referred to as organic leads.
- Affiliate marketing: a process wherein a product or service developed by one entity is sold by other active sellers for a share of profits. The entity that owns the product may provide some marketing material (e.g., sales letters, affiliate links, tracking facilities, etc.); however, the vast majority of affiliate marketing relationships come from e-commerce businesses that offer affiliate programs.
- CPM (Cost Per Mille) or CPT (Cost Per Thousand Impressions) is when advertisers pay for exposure of their message to a specific audience. “Per mille” means per thousand impressions, or loads of an advertisement. However, some impressions may not be counted, such as a reload or internal user action.
- CPV (Cost Per Visitor) is when advertisers pay for the delivery of a Targeted Visitor to the advertisers website.
- CPV (Cost Per View) is when advertisers pay for each unique user view of an advertisement or website (usually used with pop-ups, pop-unders and interstitial ads).
- CPC (Cost Per Click) or PPC (Pay per click) is when advertisers pay each time a user clicks on their listing and is redirected to their website. They do not actually pay for the listing, but only when the listing is clicked on. This system allows advertising specialists to refine searches and gain information about their market. Under the Pay per click pricing system, advertisers pay for the right to be listed under a series of target rich words that direct relevant traffic to their website, and pay only when someone clicks on their listing which links directly to their website. CPC differs from CPV in that each click is paid for regardless of whether the user makes it to the target site.
- CPA (Cost Per Action or Cost Per Acquisition) or PPF (Pay Per Performance) advertising is performance based and is common in the affiliate marketing sector of the business. In this payment scheme, the publisher takes all the risk of running the ad, and the advertiser pays only for the number of users who complete a transaction, such as a purchase or sign-up. This model ignores any inefficiency in the seller’s web site conversion funnel. The following are common variants of CPA:
- CPL (Cost Per Lead) advertising is identical to CPA advertising and is based on the user completing a form, registering for a newsletter or some other action that the merchant feels will lead to a sale.
- CPS (Cost Per Sale), PPS (Pay Per Sale), or CPO (Cost Per Order) advertising is based on each time a sale is made.
- eCPM: Effective CPM or eCPM calculated through other conversion events such as Cost per Clicks, Cost per Downloads, Cost per Leads etc. for example when an advertiser getting $2 per download and for 100,000 impressions you received 10 downloads worth $20, in this case your effective CPM or eCPM will be 2*20*1000/100,000= $0.4
- Fixed Cost: Advertiser paying fixed cost for delivery frame by campaign flight dates without any relevance to performance
- Cost per conversion Describes the cost of acquiring a customer, typically calculated by dividing the total cost of an ad campaign by the number of conversions. The definition of “Conversion” varies depending on the situation: it is sometimes considered to be a lead, a sale, or a purchase.
Online advertisement as Digital Promotions for Television
Online advertisement can also be classified as Digital Promotions. Digital promotion in connection to the television industry is when networks use authentic digital resources to promote their new shows in a growing vast range of venues. Television networks development of digital off air promotional strategies allowed digital promotion to remain significant to the advertisement advancement in the television.
Examples of television online digital promotions: The Sci Fi network for loaded a special recap episode of Battlestar Galactica onto Microsoft’s Xbox online gaming service; this gave the audience additional opportunities to sample content if they may or may not be familiar with the show. Another example of digital promotion in television is when network CBS incorporated new digital technologies of Bluetooth-enabled mobile devices that were able to download a thirty-second clip of a new show on their devices; consumers standing in range of a billboard don’t need an internet link to download the show’s content. These non-linear viewing opportunities provided as a valuable tool for gaining audiences; and to encourage them to intersect with the linear audience.
Internet users can benefit from online advertisement, such as getting the online contents they need for free that otherwise would have to pay for a fee from the funds of the advertisers. However, the catch is that they have to share personal information to the data collectors, which raises a controversy over this topic. 
In a one-to-one approach, marketers target a user browsing the Internet alone and so that the marketers’ messages reach the user personally. This approach is used in search marketing, for which the advertisements are based on search engine keywords entered by the users. This approach usually works under the pay per click (PPC) method.
Appeal to specific interests
When appealing to specific interests, marketers place an emphasis on appealing to a specific behavior or interest, rather than reaching out to a broadly defined demographic. These marketers typically segment their markets according to age group, gender, geography, and other general factors.
Appealing to specific users can be achieved through behavioral targeting which refers to the use of behavioral patterns and putting up the relevant content suitable to the viewer’s interest obtained from the user through cookies and other tools and contextual advertising which refers to the publishing of advertisements and ads based on the context the user in. For example if the user is searching for coffee, the search engine publishes ads related to coffee.
In conventional niche marketing, clusters of consumers (the niche) are identified in order to more economically and efficiently target them. Similarly, niche internet marketing attempts to create a more direct advertising message for those who are seen as most likely to buy the product being advertised (see Target audience and Conversion rate).
Niche internet marketing focuses on marketing products and services which are, or can appear, tailor-made for a specific subset of consumers who are expected to buy the product or service with a specific motivation. The online advertising message (or product web site) can then be similarly tailor-made to target that assumed motivation. In combination with search engine optimization, the niche internet marketer can attempt to increase the likelihood that their product’s advertisement (or site) will be seen by customers in the relevant niche.
In Internet marketing, geotargeting is the methods of determining the geolocation of a website visitor with geolocation software, and delivering different content to that visitor based on his or her location, such as latitude and longitude, country, region or state, city, metro code or zip code, organization, Internet Protocol (IP) address, ISP, and other criteria.
Though, as seen above, the large majority of online advertising has a cost that is brought about by usage or interaction of an ad, there are a few other methods of advertising online that only require a one time payment. The Million Dollar Homepage is a very successful example of this. Visitors were able to pay $1 per pixel of advertising space and their advert would remain on the homepage for as long as the website exists with no extra costs.
- Floating ad: An ad which moves across the user’s screen or floats above the content.
- Expanding ad: An ad which changes size and which may alter the contents of the webpage.
- Polite ad: A method by which a large ad will be downloaded in smaller pieces to minimize the disruption of the content being viewed
- Wallpaper ad: An ad which changes the background of the page being viewed.
- Trick banner: A banner ad that looks like a dialog box with buttons. It simulates an error message or an alert.
- Pop-up: A new window which opens in front of the current one, displaying an advertisement, or entire webpage.
- Pop-under: Similar to a Pop-Up except that the window is loaded or sent behind the current window so that the user does not see it until they close one or more active windows.
- Video ad: similar to a banner ad, except that instead of a static or animated image, actual moving video clips are displayed. This is the kind of advertising most prominent in television, and many advertisers will use the same clips for both television and online advertising.
- Map ad: text or graphics linked from, and appearing in or over, a location on an electronic map such as on Google Maps.
- Mobile ad: an SMS text or multi-media message sent to a cell phone.
- Superstitial: An animated ad on a Web page from Enliven Marketing Technologies. It uses video, 3D content or Flash to provide a TV-like advertisement. Used to be known as Unicast Transitional ads as they were originally made by Unicast Communications but the company was acquired by Viewpoint Corporation in 2004, which then changed its name to Enliven in 2008.
- Interstitial ad: a full-page ad that appears before a user reaches their original destination.
- Frame ad: an ad that appeared within an HTML frame, usually at the top with the site logo. As the user browsed the site, the frame would not change.
Display advertising appears on web pages in many forms, including web banners. These banners can consist of static or animated images, as well as interactive media that may include audio and video elements. Display advertising on the Internet is widely used for branding. This is why metrics like interaction time are becoming more relevant. This may change in the future as display advertising is becoming much more targeted to users, much like how search engine ads can be extremely relevant to users based on what they are searching for. Display advertisers use cookie and browser history to determine demographics and interests of users and target appropriate ads to those browsers. Banner ad standards have changed over the years to larger sizes, in part due to increased resolution of standard monitors and browsers, in part to provide advertisers with more impact for their investment. The standards continue to evolve. Banner ads can be targeted to internet users in many different ways in order to reach the advertiser’s most relevant audience. Behavioral retargeting, demographic targeting, geographic targeting, and site based targeting are all common ways in which advertisers choose to target their banner ads.
Affiliate marketing is a form of online advertising where advertisers place campaigns with a potentially large number of small (and large) publishers, who are only paid media fees when traffic to the advertiser is garnered, and usually upon a specific measurable campaign result (a form, a sale, a sign-up, etc.). Today, this is usually accomplished through contracting with an affiliate network.
Affiliate marketing was an invention by CDNow.com in 1994 and was excelled by Amazon.com when it launched its Affiliate Program, called Associate Program in 1996. The online retailer used its program to generate low cost brand exposure and provided at the same time small websites a way to earn some supplemental income.
In addition to contextual targeting, online advertising can be targeted based on a user’s online behavior. This practice is known as behavioral targeting. For example, if a user is known to have recently visited a number of automotive shopping / comparison sites based on clickstream analysis enabled by cookies stored on the user’s computer, that user can then be served auto-related ads when they visit other, non-automotive sites.
In the United States the Federal Trade Commission has been involved in the oversight of behavioral targeting for some time. In 2011 the FTC proposed a “Do Not Track” mechanism to allow Internet users to opt-out of behavioral targeting.
Semantic advertising applies semantic analysis techniques to web pages. The process is meant to accurately interpret and classify the meaning and/or main subject of the page and then populate it with targeted advertising spots. By closely linking content to advertising, it is assumed that the viewer will be more likely to show an interest (i.e., through engagement) in the advertised product or service.
Social network advertising
Social network advertising is a form of Online advertising that focuses on social networking sites. Advertising on social media networks can take the form of direct display ad buys at the social networks, self-serve advertising through internal ad networks, and ad serving on social network applications through special social network application advertising networks.
Ad server market structure
Given below is a list of top Ad server vendors in 2008 with figures in millions of viewers published in an Attributor survey. Since 2008 Google has controlled an estimated 69% of the online advertising market.
|Vendor||Ad viewers (millions)|
Advantages and limitations of Internet marketing
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Internet marketing is inexpensive when examining the ratio of cost to the reach of the target audience. Companies can reach a wide audience for a small fraction of traditional advertising budgets. The nature of the medium allows consumers to research and to purchase products and services conveniently. Therefore, businesses have the advantage of appealing to consumers in a medium that can bring results quickly.
Internet marketers also have the advantage of measuring statistics easily and inexpensively; almost all aspects of an Internet marketing campaign can be traced, measured, and tested, in many cases through the use of an ad server. The advertisers can use a variety of methods, such as pay per impression, pay per click, pay per play, and pay per action. Therefore, marketers can determine which messages or offerings are more appealing to the audience. The results of campaigns can be measured and tracked immediately because online marketing initiatives usually require users to click on an advertisement, to visit a website, and to perform a targeted action.
Problems of online advertising
The use of online advertising has implications on the privacy and anonymity of users. Hosting the banner images on its servers and using third-party cookies, the advertising company is able to track the browsing of users across these two sites.
Third-party cookies can be blocked by most browsers to increase privacy and reduce tracking by advertising and tracking companies without negatively affecting the user’s Web experience. Many advertising operators have an opt-out option to behavioral advertising, with a generic cookie in the browser stopping behavioral advertising.
There is also a class of advertising methods which are considered unethical and may even be illegal. These include external applications which alter system settings (such as a browser’s home page), spawn pop-ups, and insert advertisements into non-affiliated webpages. Such applications are usually labelled as spyware or adware. They may mask their questionable activities by performing a simple service, such as displaying the weather or providing a search bar. These programs are designed to dupe the user, acting effectively as Trojan horses. These applications are commonly designed so as to be difficult to remove or uninstall. The ever-increasing audience of online users, many of whom are not computer-savvy, frequently lack the knowledge and technical ability to protect themselves from these programs.
- One of the challenges that Internet marketers face (as does the general public) is that many internet products are outright scams or promoted with deception making it difficult to know which one is worth buying. This is especially the case with products that are supposed to train or aid Internet marketers in making money. While the quality of products has improved in the past few years, ethics are often still missing in online marketing. Many so-called money making products are “empty boxes” in which there is essentially nothing there, yet a buyer is to make money by reselling this empty box to others. Pyramid schemes are also still prevalent.
- The consumer is unable to physically feel or try on the product which can be a limitation for certain goods. However a survey of consumers of cosmetics products shows that email marketing can be used to interest a consumer in visiting a store to try a product or to speak with sales representatives; from here a purchase decision can be made 
- The marketer will not be able to use personal interaction to influence the audience as the marketing is completely based on the advertisement and the information that the advertisement might lead to (websites, blogs and other channels).
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Information security is important both to companies and consumers that participate in online business. Many consumers are hesitant to purchase items over the Internet because they do not believe that their personal information will remain private. Some companies that purchase customer information offer the option for individuals to have their information removed from their promotional redistribution, also known as opting out. However, many customers are unaware if and when their information is being shared, and are unable to stop the transfer of their information between companies if such activity occurs. Additionally, companies holding private information are vulnerable to data attacks and leaks. Internet browsing privacy is a related consumer concern. Web sites routinely capture browsing and search history which can be used to provide targeted advertising. Privacy policies can provide transparency to these practices. Spyware prevention software can also be used to shield the consumer.
Another consumer e-commerce concern is whether or not they will receive exactly what they purchase. Online merchants have attempted to address this concern by investing in and building strong consumer brands (e.g., Amazon.com, eBay, and Overstock.com), and by using merchant and feedback rating systems and e-commerce bonding solutions. All these solutions attempt to assure consumers that their transactions will be free of problems because the merchants can be trusted to provide reliable products and services. Additionally, several major online payment mechanisms (credit cards, PayPal, Google Checkout, etc.) have provided back-end buyer protection systems to address problems if they occur.
Online advertising encompasses a range of types of advertising, some of which are deployed ethically and some are not. Some websites use large numbers of advertisements, including flashing banners that distract the user, and some have misleading images designed to look like error messages from the operating system, rather than advertisements. Websites that unethically use online advertising for revenue frequently do not monitor what advertisements on their website link to, allowing advertisements to lead to sites with malicious software or audience-inappropriate material. The ethical propriety of advertisers that use web searches for competitors’ brands to trigger their own ads has been questioned.
Some argue that website operators who ethically use online advertising typically use a small number of advertisements that are not intended to distract or irritate the user, and do not detract from the design and layout of their websites. Many website owners deal directly with companies that want to place ads, meaning that the website linked to by the advertisement is legitimate.
Some companies perform customer engagement studies in online marketing to insure consumer satisfaction, through the use of online compliance centers, building and deploying fraud detection tools, while inspecting websites and publishers to insure website pages offer the highest degree of information security and compliance with Can Spam Requirements.
“Internet marketing” scams
In May 2012, The Verge writer Joseph L. Flatley reported that the terms “Internet marketing” and “Internet marketer” have been co-opted by a loose association of confidence artists running online get-rich-quick schemes.
Effects on industries
The number of banks offering the ability to perform banking tasks over the internet has increased. Online banking appeals to customers because it is often faster and considered more convenient than visiting bank branches.[not relevant]
In addition to the major effect internet marketing has had on the technology industry, the effect on the advertising industry itself has been profound. In just a few years, online advertising has grown to be worth tens of billions of dollars annually. PricewaterhouseCoopers reported that US$16.9 billion was spent on Online marketing in the U.S. in 2006.
This has caused a growing impact on the United States’ electoral process. In 2008, candidates for President heavily utilized Internet marketing strategies to reach constituents. During the 2007 primaries, candidates added, on average, over 500 social network supporters per day to help spread their message. President Barack Obama raised over US$1 million in one day during his extensive Democratic candidacy campaign, largely due to online donors.
Several industries have heavily invested in and benefited from internet marketing and online advertising. Some of them were originally brick and mortar businesses such as publishing, music, automotive or gambling, while others have sprung up as purely online businesses, such as digital design and media, blogging, and internet service hosting.[