Beginner’s guide: 8 types of digital advertising

Traditional channels that were once the mainstay of small business advertising—such as newspaper ads, billboards, and radio spots—all required spending money to reach a broad audience. You had to hope that some of the people who saw a billboard would not only fall into your target audience but also be interested enough to remember later what they saw. Digital advertising changed the game, providing small businesses with options to make your advertising efforts pay off more directly.

Digital advertising provides several unique benefits that make it valuable to small businesses, including:

• Digital advertising can be targeted. You can focus your ads on the people most likely to want your product based on demographic factors, interest categories, and/or online behavior. That means you’re only spending money to serve ads to people who are core to your goals.

• You can reach consumers who have purchasing intent. Some types of digital advertising allow you to target keywords as well as audience segments, meaning you show up right when someone is looking for the products or services you offer.

• Ads appear where customers do some of their shopping. An ad on the highway requires the driver to remember it later, but an ad that shows up on someone’s computer or smartphone appears on the same device they already use for much of their shopping. The path from seeing an ad to making a purchase is much easier.

• You can pay for clicks rather than exposure. When you run a newspaper ad, your cost is the same no matter how many people read it, much less take action. Many digital advertising channels use a pay-per-click (PPC) model, meaning you only pay when a consumer is interested enough to click on the ad.

• You can measure results. Digital advertising produces rich analytics. You can track which ad campaigns drive clicks and purchases. That gives you the power to refine your marketing strategy over time for better results.

Digital advertising encompasses many different channels and tactics. To help you choose the right online advertising channels for your business, below we’ve included what you need to know about the most common types of paid digital advertising.

Search engine marketing (SEM) is advertising that shows up on the search engine results page (SERP) of popular search engines like Google and Bing. When someone performs a relevant search, your ads can appear above, alongside, or below the organic search results.

The main things a small business should know about SEM are:

• Search engines reach a large audience. For many people, a search engine is their first stop when they use the web. According to Oberlo, Google regularly receives almost 90 billion global visits a month. Bing lags Google but still claims more than 100 million daily active users (or about 3 billion a month).

• You can target ads based on search intent. In addition to targeting based on geographic location and user interests, SEM ads also use keyword targeting. That means your ads show up for people already searching for what you sell.

• You pay for genuine interest. The typical pricing model for SEM is pay-per-click (PPC), meaning you don’t have to pay every time a person sees your ad—you pay only when someone is interested enough to click on it. In short, the money you spend is more likely to lead to action.

• Your results depend on your budget. SEM platforms use a bidding model to place ads. If you want your ads to show up for popular search terms, your budget needs to match (or beat) what your competitors spend. According to WordStream, the average CPC (cost per click) on Google Ads is $4.22. But the cost varies a lot based on your industry and keywords. You can find a breakdown of averages based on industry in their data, but to give you an idea: in the restaurant/food industry, it’s $1.95, while home improvement is $6.55.

Display advertising refers to many of the ads you see around the web on your favorite blogs and entertainment and news websites. Display ads usually combine text with an image or video that links back to your website. The biggest, most popular display ad network is Google AdSense, which powers ads on over 3 million websites. But it’s not the only game in town. You can also run display ads on Amazon, with Microsoft Advertising, and through networks like Media.net and Adsterra. Below are some of the benefits.

• Display networks have a huge reach. Most of the websites you visit that run ads work with a display network, which means you can potentially reach almost everyone who uses the internet with display ads. They’re especially useful for brand awareness campaigns, since they put brand information in front of people on websites where they already spend their time.

• You can use contextual targeting. Display networks offer many of the same targeting options we’ve already covered, like location and user interest. But you can also use contextual targeting, ensuring that your ads show up alongside related content. A local pet store can program ads to show up on content about dog training. Some display networks also let you choose specific websites you want to show up on (or not).

• Display advertising offers remarketing options. Many consumers aren’t ready to make a purchase the first time they visit your website, but you don’t want them to forget about you once they click away. Remarketing allows you to get your ads in front of people who have already shown interest in your business and are therefore more likely to buy.

• Display ads have a relatively low click-through rate (CTR). The average CTR for display ads is only around 0.1%. That’s lower than most of the other ad types on this list, which makes it better suited for brand awareness campaigns than more conversion-focused ones. Using targeting features to deliver more-personalized ads can increase CTR by 2.3%, so applying user data to get your ads in front of relevant audiences can make a big difference.

• Display ads usually cost less than search. Display ads use either a PPC or a cost-per-1,000 impressions (CPM) pricing model. WordStream reports that average CPC for display ads on Google is $0.63, and DashThis puts the average CPM at $3.12. But as with search, your costs will vary depending on your industry, budget, and targeting parameters.

Social media advertising lets you reach a huge audience on sites where your audience already spends a lot of time. According to Statista, 4.89 billion people use social media worldwide and people average 2.5 hours a day on social media platforms.

Social media is an industry that’s constantly changing. Today, there are a few main players for B2C (business-to-consumer) small businesses to consider. Here’s what you should know about advertising with each:

• Facebook. Facebook has over 2 billion daily users. The platform offers sophisticated targeting options based on user data and offers a few different ad types. You can choose either a PPC or CPM payment model. The average cost per click on the platform is around $0.66.

• Instagram. Instagram is an image-based social media platform owned by the same company as Facebook (Meta). You can manage ad campaigns for both in the same place, and the targeting features are similar. Instagram has 1.35 billion users and is growing. Instagram advertising also offers both PPC and CPM options and has an average CPC of $1.06.

• TikTok. TikTok is a video-based social platform with more than 834 million users that has been growing in popularity. TikTok offers both CPM and PPC pricing options for its ads. WordStream puts the average TikTok CPC at $1 and CPM at $6.06.

• X (Twitter). X is a text-based social media platform that had around 368 million users at the start of 2023. According to WordStream, the average CPC is $0.38. Social media sites are fast-moving in general, but Twitter is undergoing frequent changes, including a recent name change to X (that users have been slow to adopt). The number of current active users, as well as your advertising options and results, may be different today than even a couple of months ago.

Mobile advertising includes any advertising that reaches consumers on mobile devices. In-app advertising is a big segment of mobile advertising that refers to ads that specifically run within mobile apps. Most digital marketing channels allow you to run ads on mobile as well as desktop, meaning mobile and in-app advertising overlap with several other categories on this list. Small businesses will want to be aware of a few unique attributes to mobile advertising:

• Mobile use is big and growing. According to data.ai, people spent an average of 4 hours and 48 minutes on their smartphones every day in 2021. And users aren’t just spending time on mobile; they also spend money. The same report found that US consumers spent $43 billion on their phones—up 30% from the year before.

• You can work with apps directly or use an ad network. Some apps, like Uber Eats, offer in-app advertising to businesses directly. You work directly with the app developer or company behind the app when creating ad campaigns. Another option is using an ad network that enables mobile and in-app advertising. Some ad networks are specifically focused on mobile. Others, like Google AdSense, provide mobile options alongside other ad types.

• You can choose from a variety of ad types and pricing models. Mobile ads can take many forms, including banner ads, native ads, playable ads, and interstitial ads (the full-screen ads that usually appear in apps at transition points, like in between levels of a game). There are also a few different payment models. CPC and CPM are both options, as is cost per action (CPA), where you pay when a user takes a specific action like a purchase or registration. As with other forms of digital marketing, costs vary considerably based on the particulars of your ad type, placement, targeting, budget, and location. To give you an idea, Appodeal reports that the average CPM for full-screen ads in the US on iOS devices hovers around$15, while the value for banner ads is $0.32. It’s worth noting that these averages vary depending on the region and device (iOS or Android).

• Geo-targeting is especially valuable on mobile. For small businesses, one of the biggest benefits of mobile advertising is geo-targeting. In addition to the other types of targeting common in digital advertising, you can use ad targeting based on a user’s precise location. That includes setting up a radius around your store location and ensuring that ads show up for people who come within it.

Affiliate marketing is a form of advertising that involves working with online influencers, businesses, or publications who send traffic or customers your way. The most common form this takes—and the one most relevant to small businesses—is working with online influencers. Your business can identify relevant influencers based on your audience and content, then work out a deal in exchange for mentions of your brand or products. Most often, the influencer is paid a percentage for each sale that results from their promotion.

For small businesses, the main things to know about affiliate marketing are:

• Influencers inspire trust. According to a 2022 Oracle survey, 37% of consumers trust social media influencers more than brands. By working with the right influencers, you can benefit from the trust they’ve earned.

• Typically, you pay only for completed sales. The most common affiliate marketing payment model is pay per sale (PPS), where you use link-tracking technology to identify every purchase an affiliate inspires, then pay them a commission. Other payment options include PPC and pay per lead (PPL).

• Relevance is key. Affiliate marketing works best when you find influencers who are relevant to your business and audience. Small businesses don’t need to partner with big movie stars (which would cost too much anyway). You can find micro-influencers who are a better fit. Restaurants can look for local food bloggers, while retailers can find nearby Instagram fashionistas with a moderate but loyal following.

• You’re linking your reputation to theirs (for better or worse). One of the biggest benefits of affiliate marketing is also its biggest risk. When an influencer is popular and beloved by their followers, the relationship gives your brand a boost. If they encounter controversy, your brand could be associated with it. Take care in selecting influencers, and consider in advance how you’ll handle any potential PR issues.

Native advertising is when ads are designed to fit in naturally with the website they appear on. Some types of native advertising fall into categories we’ve already covered in this piece; search ads that resemble organic search results and social ads that show up as promoted posts in users’ feeds both fall into this category.

In addition, businesses can use native ad networks like Taboola and Outbrain to place native content ads on websites around the web. They often show up as “recommended content” next to or below media content. The main things a small business should know about this kind of advertising is:

• Native ads are designed to blend but are always labeled. Native advertising aims to overcome ad fatigue by ensuring that ads fit in with the content readers trust. Outbrain research shows that 68% of consumers trust ads seen in an editorial environment. To keep that trust (and meet legal requirements), native ads must always be labeled.

• They tend to be focused on content, rather than products. An ad promoting a product won’t blend seamlessly into a media environment focused on content. Native ads work best for businesses invested in content marketing. You can use native ads to promote your content, such as the blog posts or videos you create, and drive traffic to your website in the process.

• Native ad platforms often use programmatic buying. Native ad platforms offer programmatic ad buying, which uses an intelligent software platform to automate the buying and selling of ad placements. The tech automatically connects brands looking to place native ads with publishers interested in running them.

• Native ads typically use a PPC pricing model. As with other digital advertising channels, pricing varies depending on the industry and ad types, but Outbrain reports an overall average CPC of $0.83 for ads that run under 6 months; $0.52 for those that run longer. To provide a sense of industry averages, for brands that sell consumer packaged goods (CPG) and retail brands, the average is $0.77.

Digital video advertising includes the video ads that show up on popular video streaming websites like Hulu, Vimeo, and YouTube. Video ads can play before, during, or after streaming content. Video advertising includes ads that are videos themselves, as well as text and banner ads that show up alongside video content.

Online video advertising has a lot of overlap with other types of digital advertising. Video ads are a common option with mobile advertising, social media advertising, and native advertising, for instance. That means your targeting options and even some of the platforms you use for video advertising may be the same as those you encounter with other advertising channels. The main things to know about video advertising are:

• Consumers watch a lot of online video. Statista reports that consumers watched an average of 19 hours of online video a week in 2022, and YouTube reports over 70 billion daily views.

• Tools for video creation have become more accessible. Between smartphone video technology and accessible video editing software tools, creating videos is now a much more affordable option than it once was. Vidyard research found that 58% of small businesses use internal resources for creating most or all video content.

• Video advertising offers several pricing models. Video advertising most often uses a bidding model for ads, with pricing options that include cost per view (CPV), CPM, CPA, and CPC. While budgets and prices vary considerably, Influencer Marketing Hub reports an average CPV of $0.010-$0.030.