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Performance marketing: do you know your PPC from your CTR?

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By Katie McQuater | Magazine Editor

February 16, 2012 | 3 min read

It’s a discipline that’s been around for a while, yet many people still aren’t clear on how performance marketing really works. Do you know your CTR from your PPC? In a fast-moving discipline full of three-letter acronyms and ever-changing terms, it can be hard to keep track of the jargon, so The Drum has compiled a shortlist of key terms, or quick guide to performance marketing.

The Drum’s special report on Performance Marketing is published on 17 February.Affiliate/publisher/partner: Drives traffic to online advertisers/merchants, usually via content on a website or blog, or paid traffic. The affiliate earns commission from the merchant when an agreed action (e.g. sale or lead) occurs. Affiliate network: A network enables affiliates/publishers to easily access a wide range of affiliate programmes, and vice versa. Networks generate revenue by charging the merchant a percentage of the commission paid to affiliates.Affiliate programme: The performance-based form of marketing to promote a merchant's products or services. The programme may include a small or large number of affiliates depending on the merchant's needs. The merchant pays a commission or lead rate on sales, enquiries or other agreed action to the affiliates in the programme.Affiliate Management Agency: An independent company utilised by some merchants/advertisers to strategically manage their affiliate programmes; recruiting the ideal blend of affiliate partners.Banner: Graphic ad displayed on a website.Cashback site: A type of affiliate website which pays its members a percentage of money earned when they make a purchase via an affiliate link on the site.CTR: Click through rate is calculated by dividing the number of clicks an ad receives by the number of impressions. For example, if a banner advert was displayed 100 times and received 20 clicks, the CTR would be 20%.Conversion: The percentage of people who purchase after clicking on an affiliate link.Cost per Lead: A commission structure which involves the merchant paying the affiliate an agreed fee for each potential customer referred to the merchant's website.Cost per Sale: A commission structure which involves the merchant paying an affiliate a percentage or flat fee for a sale of a product or service to a customer referred to the merchant's site.CPA: Cost per acquisition is what a merchant is willing to pay for an acquisition/lead.CPC: Cost per click is one of the payment models by which an advertiser pays for each click through made on their ad.CPM: Cost per thousand is one of the online payment models by which an advertiser pays for every 1000 impressions of their ad.Merchant/advertiser: Online retailer or business owner.PPC: The practice of paying for traffic from search engine advertising services on a cost per click basis.Reach: The number of unique visitors that visited a site over a certain period, expressed as a % of the universe for the demographic category.Voucher code: A voucher code is supplied by a merchant to an affiliate for them to promote on their site and give money off a purchase.
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