Is Internet advertising burning too much money? You need to know these 5 points

Advertising is not just about spending money. What marketers need to understand more are the data indicators and related rules behind them so that they can spend their money in the right place.

1. Sharpen your tools first – Learn the significance of advertising data indicators

The following is a collection of some important indicator terms that you will come across in advertising. Due to the large number of advertising platforms at home and abroad, the author has only selected some indicators with universal significance. You can use them in comparison according to your different advertising platforms.

2. Understand the logic and principles behind each advertising platform

The era of channel being king may have passed, but advertising is an important source of customer acquisition for e-commerce, and marketing efficiency largely affects the cash flow and cost structure of any e-commerce model. I have been in the e-commerce industry for nearly 8 years, spent more than 1 billion RMB, and paid a lot of tuition fees. Therefore, I hope to share some universal things with you to help you pay less tuition fees in 2020.

In the course of China's business development, there have been many phenomena of following the trend, just like many people plunged into the stock market or P2O without knowing what finance is, and being cut off is the inevitable result. This is true for finance and also for e-commerce. I once witnessed a foreign marketing executive who didn’t know much about advertising. He spent 220,000 RMB to attract interactions for an ordinary post, but his own website did not attract any paid traffic and the number of UVs was still pitifully small.

It is crucial to understand the logic behind each traffic platform. The author mainly follows the advertising logic publicly disclosed by Google, the originator of Internet advertising, and extracts some universal methods that can be migrated to other platforms for your reference.

3. Key indicators of absolute advertising performance - advertising ranking

Behind the advertising on large platforms is a real-time bidding mechanism. In short, many advertisers are queuing up to bid for the top exposure position. The formula given by Google Adsense chief scientist is:

• Ads Ranking: The ranking of ads (the closer the ad is to the front, the greater the probability of being exposed to users)
• Bidding: A value that can be set in the background based on your budget.
• Ads Quality: comprehensive quality of ads, including landing page quality, CTR (click-through rate), relevancy (relevance of ads to audiences), overall account quality, etc.

This formula shows that the advertising system does not simply determine your ad ranking through budget (bidding). Ad quality is also an important factor in determining the final delivery efficiency. For example:

There are four ads above. Ad D has the highest bid, but the one that finally gets the best ranking is Ad B. Ad D loses its bidding advantage due to its poor ad quality, so it ranks last. The corresponding advertising cost will also increase accordingly. Therefore, excellent advertising quality can act like a lever to leverage the efficiency of the entire advertising campaign to reduce costs and increase ROI.

IV. Rules for charging advertising platform fees

In most RTB (Real Time Bidding) advertisements, the bidding fees charged by the advertising platform to advertisers are not the same as when we shop in a supermarket. We pay the price of the product. In Google's Adsense system, the second-place bidding principle is adopted (I believe that most domestic and foreign advertising channels will also follow this logic). The internal bidding charging mechanism can be understood as the following formula:

The actual price that advertisers need to pay = the score of ads with lower scores than yours / the quality of your ads + 0.01

From the actual CPC, we can see that it is not the highest-ranked ad that needs to pay more. In the above figure, Ad B has the highest ranking score, but the actual CPC is only 3.61. However, Ad C is not ranked high but has to pay a CPC as high as 4.01. This also proves the magical power of the advertising quality score lever, which can help you acquire more users with the same or even less budget.

5. How to improve the power of the core lever - Ad Quality Score

The four factors in the above picture are the key factors that determine the advertising quality score. Next, I will break them down for you.

1. Click-through rate (CTR)

According to my experience, there are three main factors that most affect click-through rate: design style, products in the picture, and price.

• The design style should first return to the product, and then come to beauty, reducing unnecessary design to highlight the product. Use colors, lines, etc. to draw the user's attention directly to the core product in the picture/video.
• At the product level, highlighting the USP (core selling point) of the product is the only principle - your users need a reason to buy. The USP of products with different attributes is also different. For standard products, price is the core factor; for non-standard products, comparison and competition with similar competitors (design, material, price and function) is the key.
• In terms of price, from my experience, the click-through rate (CTR) of materials with prices marked on them is often higher than that without prices marked on them. If there is an advantage in price, I strongly recommend putting the price up.

2. Landing Page Quality

For websites, the quality of the landing page is mainly related to the loading speed of the website, the website's rating, and the website's mobile device adaptability (for website-based advertising).

For App installation, ASO screenshot design for Appstore and other app stores is closely related to keywords, download conversion rate, etc. You can view this data in the background of Appstore and other app stores.

3. Relevance

Relevance simply refers to the degree of connection between your ad and your targeted audience. Theoretically speaking, the more relevant the product promoted in your ad is to your audience's preferences, the higher the correlation will inevitably be. But in practice, the more precise the users you target, the smaller the number of users will be. This limits your audience pool. As you continue to increase your advertising volume, the most relevant pool will sooner or later become saturated. At this time, you need to make a balanced choice between expanding the audience pool and relevance.

In this regard, the author recommends that more A/B testing be conducted. Different advertising platforms, audiences, products, and industries will all affect the balance point of this scale. (A/B testing will be explained in a separate chapter later)

4. Account Quality

Account quality refers to the quality rating of the account on the platform when you place an advertisement. Factors affecting account quality include user complaints, advertising structure, etc.

Many advertisers believe that if they receive complaints from users about their ads, they can simply suspend the corresponding campaign. In fact, frequent complaints from users will cause your advertising account rating to drop. Then the rating of the advertising account will indirectly affect your own advertising quality score, thereby affecting your customer acquisition cost and delivery volume.

summary

Although the effectiveness of advertising has complex logic and algorithms on the platform, you don’t actually need to care about so many rules. Just remember one sentence:

“Push good products to the right users in the right way and through the right channels”

You can use the formula and indicators above to analyze this sentence in reverse. Would you find it more reasonable?

Author: Mr. J

Source: Mr. J