Fundamentals
The basic problem in advertising is finding the audience who is likely to buy the product/ service (target audience).
Placement and position
There may be place for a limited number of advertisements to be displayed in a certain venue. Yet, there may be several advertisers competing for those places. Further they may be interested in gaining favorable placement in the ad-list.
Coupon distribution
Consider a seller wanting to advertise inventory to target customers, or wanting to spur business. In exchange for a share in the resulting sales revenue, Internet coupon distribution companies like groupon make a seller’s discount-coupons available to customers. Customers are attracted by the prospect of getting goods/ services at a cheaper rate. The sellers are attracted by the prospect of undiscounted business the customer’s visit may generate.
Web content-driven advertising
Many companies offer sellers the opportunity to advertise their products on webpages with related content. The problem then is to identify web-pages with visitors likely to buy the product.
Advertisement types
These are either text based ads, which invite an immediate click or display ads, which result in a delayed action by the customer. Customer behavior is tracked and this is measurable.
Advertisers either pay per click (PPC) or pay per impression (based on the number of times the ad is viewed).
In case the advertiser pays per click, he can potentially fall victim to fraudulent clicks: clicks by competitors or bots employed by the displayer.
Ad-Placement services
Ad-placement services often facilitate placement of advertisements on content-pages meeting the criteria useful to the user. They may, as in the case of search engines or web portals, themselves have content-pages; or they may team up with other website owners to display advertisements on their pages in exchange for given them a cut in the advertising revenue earned by the advertising service. Eg: Google AdWords.
Display auctions
For every candidate content-page located by the ad-placement service, the service picks ads to display using a] an auction using bids preset by advertisers, b] the likelihood of the ad being clicked (thereby generating revenue for the placement service) - aka ad-quality, which can be measured using statistical experiments.
The ad-placement service may also consider the limited budget allotted by the advertiser in picking the auctions into which he is entered - for example to space advertisements in various parts of the day; and they may allow advertisers to set different bids at different times of the day etc..
Search engine results
In case of search engines, the visitor’s intention is judged using the search phrase, the location of the device whence search is done, time of the day etc.. Advertisers are able to specify relevant result pages (on which they can advertise) using these parameters.
Search phrase targeting
Advertisers can specify positive and negative keywords. [Incomplete]
Case study
Amrit’s taxi service heavily depended on this advertising strategy. He made the transition from advertising in printed directories in 2008 when he observed that strategy failing.
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