Definitions
This chapter provides a comprehensive glossary of advertising terminology and key concepts.
Glossary of Ads Terminology
Core Terms
- Advertiser: A business or individual paying to display ads
- Publisher: The platform or website displaying ads
- Inventory: Available ad slots or impressions
- Impression: A single display of an ad to a user
- Click: When a user interacts with an ad
- Conversion: A desired action (purchase, signup, etc.) after clicking an ad
Pricing Models: CPM, CPC, CPA
CPM (Cost Per Mille / Cost Per Thousand Impressions)
The advertiser pays a fixed amount for every 1,000 impressions served, regardless of clicks or conversions.
CPC (Cost Per Click)
The advertiser pays only when a user clicks on the ad. The platform must predict click probability to set appropriate prices.
CPA (Cost Per Action / Cost Per Acquisition)
The advertiser pays only when a specific action is completed (e.g., purchase, signup). This requires predicting conversion probability.
Revenue Metrics: RPM, Revenue Per Query
RPM (Revenue Per Mille)
The revenue generated per 1,000 impressions. This is a key metric for publishers to optimize.
Revenue Per Query
The average revenue generated from a single user query or page view. Critical for understanding system efficiency.
Advertiser Metrics: ROAS, Conversion Rates, Delivery Efficiency
ROAS (Return On Ad Spend)
The revenue generated divided by advertising spend. Advertisers optimize for ROAS to ensure profitable campaigns.
Conversion Rates
The percentage of clicks that result in conversions. Higher conversion rates indicate better targeting and relevance.
Delivery Efficiency
How effectively an advertiser's budget is spent to reach their target audience. Includes considerations of frequency, recency, and targeting precision.
User Experience Metrics: Ad Load, Relevance, Intrusiveness
Ad Load
The number or proportion of ads shown relative to content. Higher ad load can increase revenue but hurt user experience.
Relevance
How well ads match user interests and context. Measured through engagement metrics and user feedback.
Intrusiveness
The degree to which ads disrupt the user experience. Balance between visibility and user satisfaction.
The Attention Economy and Unit Economics
Understanding the economics of attention is crucial:
- Attention as a Resource: Users have limited attention, creating scarcity
- Unit Economics: The cost to acquire attention vs. the revenue it generates
- Market Dynamics: How supply (inventory) and demand (advertiser budgets) interact
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