Updated: May 27, 2021
What is performance marketing?
Performance marketing is a comprehensive term for online marketing and advertising programs where advertisers pay only when a specific action occurs. These actions can include a generated lead, a sale, a click, and more.
Performance marketing professionals—in agencies, with media companies, publishers, or otherwise—rely heavily on paid marketing channels including:
Social media advertising
Search engine marketing
In this post, we’ll unravel the essentials of performance marketing:
How performance marketing works
Terms you need to know
An overview of the top platforms and channels available
How do performance marketing platforms work?
Let’s briefly explore how most platforms operate.
As is the case with all media (often purchased by media buyers), each channel has a specific audience and offers different types of advertising platforms to reach them. For instance:
Facebook, the leading social media channel, offers a variety of options to show your ads topeople visiting the Facebook or Instagram platform.
Taboola, the leading content discovery network, offers advertisers the ability to reach the readers of tens of thousands of leading online publications.
Google displays your ads in search results pages (and across the Google Ads network).
Obviously, no channel shows all the ads available, all the time, to everyone. So how do the different platforms choose what to show? A combination of the following factors come into play based on:
Target audience and segmentation—Each ad platform offers ways for you to target your audience in the form of audience segments.
Bid—The modern advertising landscape calls upon programmatic capabilities that factor in the amount you’ve agree to pay to show your ad in a specific place and time, to your chosen target audience.
Quality and relevance—Trust is the biggest issue people have with advertising of any kind. As such, ad performance is factored. If your ad doesn’t work—that is, it earns low quality ratings—the network will reduce its exposure.
Conversion—The economics of performance marketing is based on consumers taking action. When the required action doesn’t take place the network doesn’t get paid. So your ad gets displayed more when it works.
Facebook advertising (and the associated fees), for example, focuses heavily on the advertiser’s bid, ad quality and relevance , and estimated amount of actions. Most platforms work in a somewhat similar manner.
Performance marketing strategy
If performance marketing is about paying for action, it pays to have a strong grasp on the various strategies most commonly used, and the actions most commonly measured.
Cost Per Impression (CPM): The amount an advertiser pays a publisher per one thousand times that their advertisement is shown
Cost Per Click (CPC): The amount an advertiser pays only when their advertisement is clicked on
Cost Per Sales (CPS): The amount an advertiser pays only when a sale is directly generated by an advertisement
Cost Per Leads (CPL): The amount an advertiser pays when they receive a sign-up from an interested consumer as a direct result of their advertisement
Cost Per Acquisition (CPA): The amount an advertiser pays when a specific action, such as a sale, a form completion, or a click, occurs
It’s worth noting that each of the above actions is an advertising objective and therefore a measure of performance marketing effectiveness. To evaluate your choices, and continue refining them, you’ll need to consider your campaign goals, choice of platforms, costs, and of course, results.