How does online advertising work?

Online advertising: the basics

Simply put, online advertising is any kind of promotion that happens over the internet, aimed at reaching a specific audience for a fee.

That sounds simple, but the world of online ads is much bigger than just banner ads on websites. Today, online advertising includes everything from social media campaigns to mobile ads, search engine results, and more.

It’s all about using the internet to send ads that are interactive and measurable, so they reach the right audience most effectively.

Whether it’s through search engines or emails, the goal is to get people to take action, whether that’s visiting your website, buying something, or signing up for updates.

Other goals of online advertising include increasing brand awareness, driving website traffic, and retargeting potential customers.

How does online advertising work?

There is no single answer to the question, ‘How does online advertising work?’ as it involves various formats, pricing models, and targeting strategies.

Some ads are simple and easy to launch, while others require advanced tools and data-driven decisions. The right approach depends on a business’s objectives, budget, and audience.

At its core, online advertising uses technology, data, and strategy to connect businesses with the right audience. It all starts with advertisers defining their goals, like driving sales or generating leads. 

Audience targeting through data

Advertising platforms like Google Ads collect user data, including location, browsing habits, and interests.

Using this data, they group users using audience segmentation, allowing businesses to target specific customer groups. Advertisers then create engaging ads using text, images, or videos to grab attention and encourage action.

The ads are displayed on the chosen platform when they go live, reaching the intended audience. 

Pricing models and tracking performance

Different pricing models determine how advertisers pay for exposure. One model is Pay-per-Click (PPC), where businesses pay each time someone clicks on their ad, and the other is cost-per-thousand impressions, where they pay for every 1,000 views.

Advertisers track performance metrics like clicks, conversions, and impressions to measure success throughout the campaign. They analyse the data and tweak their strategy, refine targeting, and optimise their ads for better results.

As online advertising is constantly evolving, with new platforms, tools, and trends, there is no one formula for success. Businesses must experiment and adapt their strategies to find the best way to reach their audience.

Examples of online advertising strategies

Online advertising comes in many forms, each designed to reach audiences in different ways. Here are some common types of online ads and how they work.

1. Mobile advertising - location-based targeting

With almost half of UK web traffic coming from mobile devices, mobile advertising is a powerful way for businesses to connect with consumers on the go.

This type of online advertising includes in-app ads, SMS marketing, push notifications, and mobile website ads.

Benefit: Mobile advertising expands your reach, so your ads are seen by users wherever they are, whether they’re scrolling through apps or browsing mobile websites. Businesses can leverage location-based targeting, allowing them to serve ads to users based on their physical location.

For example, a local coffee shop could use location-based ads to send offers to people nearby during peak morning hours, potentially increasing foot traffic and sales.
 

2. Retargeting (Remarketing) - increased conversions

Retargeting ads re-engage users who have previously interacted with a brand, whether by visiting a website, adding a product to their cart, or engaging with content on social media.

These ads remind potential customers about a product they showed interest in and encourage them to take action.

Benefit: Retargeting significantly boosts conversions by reaching people who are already familiar with your brand.

Since these users have previously shown interest, they’re more likely to complete their purchase, making retargeting a powerful strategy for customer retention and maximising ROI.

You can find out more about retargeting with our post: Have you got déjà vu?

3. Display advertising - brand awareness

Display ads use eye-catching visuals, including images, banners and videos, to grab attention on third-party websites, blogs, and news sites.

These ads are great for brand exposure and can be targeted based on user interests, demographics, or browsing behaviour.

Benefit: Display advertising is excellent for building brand awareness as it keeps your brand in front of potential customers, even when they’re not actively searching for your product.

With access to large ad networks like Google Display Network (a collection of websites and apps that partner with Google to display ads), display ads help businesses reach a wide audience at scale.