Online advertising facts for kids

Online advertising, also known as online marketing or digital advertising, is a way for businesses to promote their products and services using the Internet. It's like putting up posters or showing commercials, but all online! This type of advertising helps companies reach many people who use websites, apps, and social media every day.

Online advertising includes different methods such as email marketing, search engine marketing (SEM), and social media marketing. You also see many types of display advertising, like web banners. Today, many ads are chosen and shown automatically by computer systems across different websites and apps. This is called programmatic advertising.

Usually, online advertising involves a publisher (like a website owner) who puts ads on their content, and an advertiser who provides the ads. Sometimes, other groups like advertising agencies help create the ads, or special servers deliver the ads and track how well they do.

Online advertising has become very popular. In the United States, the money spent on internet ads grew a lot, even more than what was spent on TV ads in recent years.

However, some online advertising practices are debated. Many internet users find ads annoying and use ad blocking tools to hide them. Also, sometimes the money from online ads isn't enough for publishers, leading some to put their content behind paywalls, meaning you have to pay to read it.

How Online Advertising Started

Advertising revenue as a percent of US GDP shows a rise in digital advertising since 1995 at the expense of print media.

In the early days of the internet, advertising was mostly not allowed on networks like ARPANET. But things changed, and by 1991, commercial use started to be permitted.

Early Email Ads

One of the first big examples of online advertising happened through electronic mail. In 1978, a person named Gary Thuerk sent an email to many users on the ARPANET to advertise a new computer. Even though rules were against it, sending marketing emails quickly grew. This type of unwanted email eventually became known as "spam."

Later, in 1994, a law firm used USENET (an early internet discussion system) to promote their legal services. This event made many people realize the power of online advertising. Today, spam is often sent by many virus-infected computers working together.

First Display Ads

Banner advertising started in the early 1990s. Website owners wanted new ways to earn money. One of the first commercial online services, Prodigy, showed banners for Sears products. The first clickable web ad was sold in 1993. By 1994, banner ads became common when popular online magazines like HotWired and Pathfinder sold ad space to big companies like AT&T.

Search Engine Ads

In 1998, a company called GoTo.com (later Overture) created the first system where advertisers could bid on keywords to show their ads in search results. Google launched its "AdWords" program (now called Google Ads) in 2000. Google then improved how ads were ranked, using both how much advertisers paid and how likely people were to click on the ads.

Modern Online Advertising (Since 2010)

More recently, companies have started to blend their ads with interesting content or useful services. For example, Red Bull streamed a famous jump from space online, and Nike created free apps for tracking sports performance. Advertisers also use social media and mobile phones a lot. Spending on mobile ads grew very quickly between 2010 and 2013.

In 2021, there was a notable event involving an Asian Giant Hornet nest found in the US. The owner tried to sell it on eBay, but a local beekeeper bought it to give it back to scientists for study. This showed how online platforms can be used for unusual sales.

Different Kinds of Online Advertising

Visual Display Ads

An example of display advertising featuring geotargeting, which means ads are shown based on your location.

Display advertising uses pictures, text, logos, animations, or videos to show its message. You can find these ads everywhere online: on websites, search engines, social media, and even in mobile apps and emails. Companies like Google and Facebook are very big in online display advertising. The main goal is to get more people to visit a website or learn about a brand. Advertisers often try to show ads to people who might be most interested, based on their online habits.

Web Banner Ads

Web banners are usually graphic ads that appear on a web page. Many of these ads are delivered by special servers.

Banner ads can be interactive, using videos, sounds, animations, or buttons. The first web banners were called frame ads. These are common spaces on a webpage set aside for ads.

• Pop-ups and Pop-unders: A pop-up ad appears in a new window that opens on top of the website you are visiting. A pop-under ad opens a new window underneath your current one. Many online experts, like Google, advise against these types of ads because they can be annoying.
• Floating Ads: A floating ad appears over the content of the website you are looking at. These ads might disappear or become less noticeable after a short time.
• Expanding Ads: An expanding ad is a banner ad that gets bigger when something happens, like when you move your mouse over it or spend a certain amount of time on the page. This allows the ad to show more information in a small space.
• Ads That Look Like System Messages: These are ads that try to look like messages from your computer or a popular app to make you click on them. They often don't mention the advertiser at first. While they might get more clicks, people can feel tricked by them.

News Feed Ads

"News Feed Ads," also called "Sponsored Stories" or "Boosted Posts," are common on social media platforms. They appear mixed in with the regular updates you see from friends or pages you follow. These ads look similar to regular posts, making them blend in. They can promote websites, fan pages, apps, or products.

Examples include Facebook's "Sponsored Stories" or Twitter's "Promoted Tweets." Because they blend in so well, these ads often get more clicks than traditional banner ads.

How Online Ads Are Sold and Delivered

A visualization of the real-time bidding system in online display advertising, showing how ads are chosen automatically.

Many different groups can be involved in showing online ads. Sometimes, a website owner chooses and serves the ads themselves. Other times, an advertising agency handles the ads. Ad space can also be sold in a bidding market, where computers automatically buy and sell ad space in real-time. This is known as programmatic advertising.

Programmatic Advertising

Programmatic advertising uses software to automatically sell and deliver digital ads on websites and apps. This means computers, not people, decide which ads to show. Ads are chosen and targeted to you using things like cookies. Cookies are small files that identify your computer and help decide which ads you might like. For example, if you visit a website but don't buy anything, cookies can help that advertiser show you ads for the same items later. This is called retargeting.

Advertisers can also gather information about your online activities across many websites. This helps them create a detailed profile of your interests to show you even more specific ads. This is called behavioral targeting. Another method is contextual advertising, where ads are shown based on the content of the webpage you are viewing. For example, an ad for sports shoes might appear on a sports news website. All these methods aim to make ads more relevant to you.

Online advertising serving process using online bidding, where many computers work together to show you ads.

Advertisers can also show ads based on where you are located, which is called geotargeting. Your IP address gives some general location information. For mobile devices, advertisers might use your phone's GPS or nearby cell towers to get a more exact location.

This whole process involves many computers working together very quickly. When you visit a webpage, your browser asks for the page content. The page then asks for ads to fill its empty spaces. Information about you (like cookies and the page you're on) is sent to an ad server. This server then talks to other platforms that gather more information about your interests and past actions. This information is then sent to an "ad exchange."

The ad exchange then lets different ad agencies bid on showing their ad to you. These agencies have ads ready and are looking for the right people to see them. They decide how much to pay based on the information about you. The ad exchange picks the winning bid, and the ad is then sent to your browser. This all happens in a tiny fraction of a second!

Interstitial Ads

An interstitial ad appears before you can see the content you asked for. Sometimes it shows while the content is loading. These ads are a type of "interruption marketing" because they pause your experience.

Text Ads

Text ads are simple text links. They can appear separately from a webpage's main content or be embedded as links within words or phrases. You might also see text ads in emails or text messages. Text ads often load faster than picture ads and can be harder for ad-blocking software to hide.

Search Engine Marketing (SEM)

Search engine marketing, or SEM, helps websites appear higher up in search engine results pages (SERPs). When you search for something, search engines show both sponsored results (ads) and organic results (non-sponsored). Search engines usually make it clear which results are ads. SEM includes everything an advertiser does to make their website more visible for certain keywords. Google's Ad Words program made this type of advertising very popular because it was easy for advertisers to use and they only paid when someone clicked on their ad.

Search engine optimization, or SEO, tries to improve a website's organic search rankings. This means making the website's content more relevant to what people are searching for. Search engines often update their rules to make sure only good quality sites rank high.

Sponsored search (also called search ads or paid search) lets advertisers pay to be included in the sponsored results for certain keywords. These ads are often sold through real-time auctions where advertisers bid on keywords. Modern search engines rank sponsored listings based on how much is bid, how likely people are to click, and how relevant the ad is.

Other Types of Online Advertising

Mobile Advertising

Mobile advertising delivers ads to wireless devices like smartphones, feature phones, or tablet computers. These can be display ads, text messages (SMS/MMS), search ads on mobile, or ads inside mobile apps and games. Mobile advertising is growing fast because more people use mobile devices, internet speeds are better, and screens are clearer.

Email Advertising

Email advertising is when an ad is an entire email or part of an email message. Sometimes these emails are sent without you asking for them, but they should always give you an option to stop receiving them. Other times, you might sign up to get emails about new products or sales.

Chat Advertising

Chat advertising involves real-time messages sent to users on certain websites. This is done using live chat software, where people working for the website might send you ads as you browse. It's similar to email advertising but happens instantly.

Online Classified Advertising

Online classified advertising is like an online bulletin board where products or services are listed in categories. Examples include websites for job listings, real estate, cars, or online auctions like Craigslist and eBay.

Adware

Adware is software that automatically shows ads on your computer once it's installed. These ads might appear within the software itself, on web pages you visit, or as pop-ups. If adware is installed without your permission, it's a type of unwanted software.

Affiliate Marketing

Affiliate marketing happens when businesses pay other people or companies (called affiliates) to help find potential customers. These affiliates get paid based on the sales or actions (like signing up for something) that come from their promotions.

Content Marketing

Content marketing is when a business creates and shares interesting content, like blogs, videos, or guides, to attract and keep customers. The idea is to provide valuable information that people want to see, which then helps the business.

Online Marketing Platforms

An online marketing platform (OMP) is a website that combines many tools for businesses. It can act like a business directory, a local search engine, and a tool to help with SEO. Big companies like eBay and Amazon are used as online marketing and logistics platforms. Many small and medium-sized businesses use these platforms to sell their goods and services.

How Advertisers Pay

Advertisers and publishers use different ways to calculate payments for ads. In 2012, about a third of online ad payments were based on how many times an ad was displayed, and two-thirds were based on how customers reacted (like clicking on an ad).

CPM (Cost Per Mille)

CPM means "cost per thousand." Advertisers pay for every thousand times their ad is shown to potential customers. These showings are called "impressions." The definition of an "impression" can vary, and sometimes advertisers use special tools to check if an ad was actually seen.

CPC (Cost Per Click)

CPC (Cost Per Click) means advertisers pay each time a user clicks on their ad. This method works well when advertisers want people to visit their websites. CPC has become very popular and makes up a large part of online advertising payments. However, not all clicks are useful; sometimes people click by accident.

Other Payment Methods

• CPE (Cost Per Engagement): Advertisers pay when someone not only sees an ad but also interacts with it.
• CPV (Cost Per View): Advertisers pay for each view of a video ad. This is common for ads on platforms like YouTube.
• CPI (Cost Per Install): For mobile apps, advertisers pay each time their app is installed.
• CPL (Cost Per Lead): Advertisers pay when a consumer shows interest in their offer, for example, by signing up for something.
• CPA (Cost Per Action): Advertisers pay when a user performs a specific action, like making a purchase or filling out a form.
• Fixed Cost: Advertisers pay a set amount for ads to be displayed for a certain period, no matter how many times they are seen or clicked.

Benefits of Online Advertising

Online advertising has many advantages:

• Lower Costs: It's often cheaper to show ads online than in traditional places like TV or print.
• Wide Reach: Online ads can reach a huge number of people around the world.
• Easy to Track: Advertisers can easily see how well their ads are working, like how many people saw them or clicked on them. This helps them make better ads in the future.
• Creative Options: Online ads can include images, videos, sounds, and interactive elements, making them more engaging.
• Targeted Ads: Advertisers can show ads to specific groups of people based on their interests or location, making the ads more relevant.
• Quick to Launch: Once an ad is designed, it can be put online very quickly and changed easily.

Concerns with Online Advertising

Security Risks

Sometimes, online ads can be used to spread harmful software like viruses. This is called "malvertising." Clicking on some ads can be risky and might lead to unwanted software being installed on your computer.

Misleading Information

The internet's complexity can sometimes be used to spread misleading information through ads. This can fund websites that publish untrue stories.

Ads Not Always Seen

Studies show that internet users sometimes ignore parts of web pages where ads usually appear. This is called "banner blindness." Even if an ad is ignored, it might still influence you without you realizing it.

Ad Fraud

There are ways advertisers can be tricked into paying too much. For example, "click fraud" happens when someone (or a computer program) clicks on an ad many times without any real interest, just to make the advertiser pay more. This can happen to waste a competitor's ad budget or to create fake revenue.

Ads Not Displaying Correctly

Because people use many different operating systems, web browsers, and devices (like phones with different screen sizes), online ads might not always look or work as the advertiser intended. This can sometimes cause legal problems if important information in an ad doesn't show up for users.

Ad Blocking

Ad blocking means that ads don't appear to the user because they are using special software or browser add-ons to hide them. Many browsers block pop-up ads by default. More and more people are using ad blockers, with a significant number of internet users having them installed.

Privacy Tools

Some web browsers offer "privacy modes" where users can hide information about themselves from advertisers. Many browsers also have "Do Not Track" options, which tell websites you don't want your activity tracked.

Privacy and User Tracking

The way publishers and advertisers collect information about users has raised concerns about privacy. Many internet users worry about their personal information being shared. Advertisers often use technologies to track what users do online to understand their interests better. This can make people uncomfortable, especially if sensitive information is involved.

Trustworthiness of Advertisers

It can be hard to know who is behind an online ad. This can lead to scams like phishing (fake emails that look like they're from real companies) or other online tricks. Clicking on ads can sometimes be a way for harmful software to get onto your computer.

Spam

The low cost of sending information online contributes to the problem of spam, which is unwanted advertising sent in large amounts. Many efforts have been made to fight spam, but it remains a challenge.

Rules and Regulations

In general, laws that protect consumers apply to both online and offline activities. However, there are specific rules for how online ads are delivered. For example, email advertising is more regulated than banner ads. In the U.S., the CAN-SPAM Act of 2003 requires commercial emails to offer a way to opt out of future messages. Mobile advertising also has rules, like needing your permission before sending ads via text message.

Many advertising groups also create their own rules to ensure fairness and transparency. These rules often focus on giving consumers control over their data and keeping data secure.

In the European Union, there are regulations like the P2B Regulation (Online Intermediation Services Regulation) that aim to make online platforms fair and transparent for businesses, especially small and medium-sized ones.

Privacy and Data Collection Rules

Privacy rules often require users' permission before advertisers can track them or send them messages. The United States has specific rules for tracking children online, called the Children's Online Privacy Protection Act (COPPA). This law requires ad networks to get parental consent before knowingly tracking kids. The U.S. Federal Trade Commission also works to enforce online privacy and security.

The European Union has stricter rules, like the "Privacy and Electronic Communications Directive," which limits how websites can use consumer data. These rules can make online advertising less effective in Europe compared to other parts of the world.

See also