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The Market Behind Online Advertisements

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The Market Behind Online Advertisements

Jay Park, Staff Writer

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  On every website you visit, every other video you watch, and even during downtimes in video games, you see advertisements. Advertisements, no matter how irritatingly intrusive they are to our online experience, will continue to exist, as they are the backbone of Google and other companies’ revenue.

  Advertising has always been relevant to businesses, big or small. It does not matter if the goods a company offers are a necessity or a luxury, a single announcement or a mention in a conversation is not going to be very effective in bringing customers. Thus, advertisements were born. From the steel carvings in Egypt to billboard signs and paper fliers in the early 19th century, advertisements have similar goals: promotion, awareness, comparisons, and retention.

  Advertisements directly alert the audience of a product a company wants to sell. Recall the time you’ve seen an advertisement that interested you. The affected audience, you in this case, will diffuse the product through contact with other people, such as your friends. The brand name of the company will spread and also increase profits of its other products. Potential customers would compare the advertised product to other stores, to see which is better. Most companies ensure that their item is appealing by making it unique or superior than its competition. Retention of customers involves reminding customers that the product still exists. Jogging customers’ memories is necessary to convince them to return to buy the product. This allows the product to become ingrained in their thoughts and strengthens its reach. You would be more motivated to buy a product from a well-known company rather than a less well-known one.

  Previously, the advertisements, no matter how many of them were produced, could only reach local areas. This was enough for the markets who could not distribute their products very far. Now, advanced transportation made long-distance customers available. In this scenario, the internet not only alerts those customers, but magnifies the range of an advertisement globally.

  Google currently has a very strong influence on today’s society. Data from Search Engine Land shows that around 66 percent of all internet searches, or 115.2 billion searches per day, were made through Google. Google capitalized their wide influence by allowing advertisements through their “Google Ads.”

  Google keeps track of keywords people use in their searches. They are tracked by cookies, which are basically bits of data, like cookie crumbs, that are attached to you as you visit websites. The more sites you look at, the more cookies you will gather. With enough cookies, Google can start identifying you as a customer. An example of how a person could be categorized could be: “male, age: 15-20, interests: skateboarding.”

  Rather than categorizing you as a person, you are a potential customer for companies’ products. This specific information is appealing to businesses because they do not have to waste resources trying to appeal to those who are not interested.

  Using the categories of keywords, advertisers bid on specific ones for their advertisement, when those websites containing those keywords are clicked, searchers are lead to a website landing page where purchase can be completed. Afterwards, advertisers compete against one another in the Google AdWords auction for select ad slots on the Google Search results page. The top bidder will have firsthand priority, meaning that their advertisements will appear primarily above or to the right-hand side of the top websites.

   The average cost per click on a website in Google AdWords is between $1 and $2 on the search network. The most expensive keywords in AdWords cost $50 or more per click. These are generally highly competitive keywords in industries that have high customer lifetime values, like law and insurance. Large companies can spend up to $50 million per year on paid search in AdWords and even small companies spend around $100,000-$120,000 dollars annually.

  Even to the teenage audience who are not capable of purchasing items that are advertised alone, it is considered cost-efficient. Google’s advertising model is revolutionary in that regard. Google’s massive arsenal of both resources: information and audience, allow for a win-win design. Companies pay for performance, which means they pay for customers must first click on the ad, and Google makes sure that it is the right audience by tracking those customers with cookies. This level of accuracy could have never been maintained before. Also, since many websites displays Google Ads, those advertisements spread like wildfire in a continuous cycle.

   Think about it. Everytime we click on an advertisement Google charges those companies money. Even if we don’t directly click the ad itself, Google earns money because they gather information about you as a customer visiting specific websites. This seemingly infinite loop generates the incredible revenue that keeps Google free.

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The Market Behind Online Advertisements