What is Performance Marketing?

As advertising methods evolve, more and more marketers are turning to performance marketing to ensure their campaigns get measurable results.

Before advertising success was measured in shares, clicks, installs, and impressions, things were a bit more basic. The creative and business forces behind a marketing campaign would use their magic to make ads, choose and pay for their placement, and hope to see results.

Things are a lot different now, and advertisers are demanding more for their money. Performance marketing is one way to get this done, and different forms of performance marketing are quickly gaining popularity in this results-driven industry.

What is performance marketing?

As the name implies, performance marketing is a type of marketing in which advertisers pay when they achieve a specified result–not before the ad runs. The non-profit Performance Marketing Association defines it as “a comprehensive term that refers to online marketing and advertising programs in which advertisers (a.k.a., “retailers” or “merchants”) pay marketing companies (a.k.a, “affiliates” or “publishers”) when a specific action is completed; such as a sale, lead or click.”

In other words, the publisher and marketer agree to these specific terms beforehand, the publisher runs the ad–whether it’s for an app, service, or other product — and the marketing company pays when those results are met. In many cases, that does mean a certain number of clicks, or, in the case of videos, a specified percentage watched; in other cases, advertisers don’t pay until consumers follow a call to action and, in the case of mobile performance marketing, actually install their app.

How is it different than other forms of marketing?

In more traditional types of marketing, the payment scheme is reversed; the advertisers pay upfront and then the publishers run ads. This type of marketing does have its place, especially when raising brand awareness. Sometimes, the first step is just letting potential consumers know that the brand exists and what services it provides. You’ll see these ads all over–on social media, websites, and in apps. And of course, with older types of ads for TV and radio, there’s no interactivity, so there’s no immediate, measurable way to discern impact.

Brand marketing, of course, has its drawbacks. As Forbes explains, “Metrics associated with this type of marketing — likes, favorites, retweets, and perceived equivalent media value — all have some sort of impact. But they’re not often discernible on a client’s bottom line. That means the client paid the agency a hefty fee for gained awareness, but nothing more.”

These days, consumers constantly have a screen in front of them, and there are hundreds of companies vying for their attention on a daily basis. It’s no wonder more and more marketing pros are turning to performance marketing so they can focus on results.

What are some examples of performance marketing?

There are quite a few types of performance marketing, but the ones gaining momentum at the moment are usually hyper-focused on mobile, often within apps themselves. Cost per view (CPV) marketing is a popular payment structure for video ads, as marketers only pay when the video is actually watched. However, what constitutes a “view” varies by platform and campaign, so it’s important to know what you want to gain from these ads and that you give consumers the relevant info upfront.

Then there’s cost per impression, often abbreviated CPM, in which advertisers pay after a certain number of views, typically per thousand. This is typically used for website ads or ads where interactivity is not required to get the desired outcome.

If you’ve played any mobile games lately, you’ve probably seen ads for other games that provide an easy link to the app store. This strategy is often used in cost per install marketing; as you’ve probably figured out, the advertisers pay when users follow this call to action and download the advertised application.

Of course, these are just a few types of performance marketing, and as the industry (and mobile technology) continues to evolve, we can expect to see even more advertising trends emerging. To keep up with the fast-moving world of mobile advertising, the pros at Tapjoy have the expertise you’re looking for.

Want to better understand the financial bottom line of your advertisements? Check out our article, “What is ROAS?” for a deep dive into measuring the effectiveness of mobile marketing campaigns

 

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