Performance marketing is a type of online advertising in which advertisers pay for their ads based on the specific actions or results that they generate, such as clicks, leads, or sales. Unlike traditional advertising, where advertisers pay for ad placement regardless of the outcome, performance marketing only charges advertisers for the performance or results of their ads.
Performance marketing is often associated with affiliate marketing, which is a form of performance marketing where advertisers pay a commission to affiliates for every sale or lead generated through their unique affiliate links. Other forms of performance marketing include search engine marketing (SEM), social media advertising, and email marketing, where advertisers pay for clicks, conversions, or other measurable actions.
One of the key benefits of performance marketing is that it allows advertisers to track the effectiveness of their ads and optimize their campaigns based on the results. This can help advertisers to improve their return on investment (ROI) and ensure that they are only paying for ads that generate tangible results.
Here are some examples of performance marketing:
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Affiliate marketing: This is a type of performance marketing in which an advertiser partners with affiliates to promote their products or services. The advertiser pays the affiliate a commission for each sale, lead or click that is generated through their unique affiliate link. Examples of affiliate programs include Amazon Associates, ClickBank, and ShareASale.
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Pay-per-click (PPC) advertising: This is a type of performance marketing where advertisers pay for each click on their ads. Examples of PPC advertising platforms include Google AdWords, Bing Ads, and Facebook Ads.
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Cost-per-action (CPA) advertising: This is a type of performance marketing where advertisers pay for a specific action, such as a sale, lead or download. CPA advertising can be used in conjunction with other types of performance marketing, such as affiliate marketing.
4. Retargeting: This is a type of performance marketing where advertisers show ads to users who have previously interacted with their brand. The goal of retargeting is to bring users back to the advertiser’s website and encourage them to take a specific action, such as making a purchase or filling out a form. Examples of retargeting platforms include Google Ads, Facebook Ads, and AdRoll.
Influencer marketing: This is a type of performance marketing where advertisers partner with social media influencers to promote their products or services. The advertiser pays the influencer a fee or commission for each sale or lead that is generated through their unique affiliate link or promo code. Examples of influencer marketing platforms include Instagram, YouTube, and TikTok.
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Case Study: Airbnb’s Referral Program
Airbnb is an online marketplace that allows people to rent out their homes or apartments to travelers. In order to acquire new customers, Airbnb implemented a referral program that rewarded existing users for referring their friends to the platform. Here’s how the program worked:
- Existing Airbnb users could invite their friends to sign up for the platform.
- When a friend signed up using the referral link, they received a discount on their first booking.
- The referrer also received a credit towards their next booking on the platform.
The referral program was a form of performance marketing because Airbnb only paid for new users who signed up and completed a booking. This meant that Airbnb could track the effectiveness of the program and optimize it based on the results.
Results:
The referral program was a huge success for Airbnb, and played a key role in the company’s rapid growth. Here are some of the key results:
- The referral program generated over 2.2 million new users for Airbnb.
- The program was responsible for over 25% of all new users on the platform.
- The program was so successful that Airbnb had to limit the amount of credit that users could earn through referrals.
The success of the referral program demonstrates the power of performance marketing in driving tangible results for businesses. By paying for the performance of the program (i.e., new users who completed a booking), Airbnb was able to scale their business quickly and efficiently.