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Definition, Benefits, Types, and Platforms (2023)



There are two ways to grow your business online: organic and paid. 

Organic marketing includes organic social media, organic search (SEO), and organic word of mouth. This approach can be effective but slow. It can take months or years to build your social following and authority on search engines organically. 

On the other hand, paid advertising, sometimes referred to as performance marketing, is fast. Your business could be at the top of search results pages and in front of your audience on social media as soon as tomorrow. This makes it a powerful lever in a world where it is harder and harder to stand out organically.

Successful paid advertising requires technical and strategic expertise—not to mention cash. By learning the fundamentals of how paid advertising works, you’ll be able to make better paid advertising decisions for your own business.

What is paid advertising?

Paid advertising is a marketing strategy in which businesses pay to display their ads to a targeted audience. The term predates the internet and can technically apply to any type of advertising, such as TV or radio advertising. However, when people use the term today, they’re most commonly referring to internet-based ads on search, social, and display networks.

Paid ad platforms almost always work on an auction system. This means the advertiser sets the budget they’d like to spend and sets a target amount they’d like to bid per action to achieve a specific action. 

The most common bids are calculated on a per-click basis. With pay-per-click advertising, or PPC ads, you pay every time a person clicks on your ad, though you can also choose to bid per impression or per conversion. Your PPC bid and total ad budget determine where your ads show up on your target audience’s searches, social media feeds, or banner ads around the web and for how long. Those who bid higher will get priority placements.

Social media strategy and planning templates

Ready to get started with your social media strategy? These free, customizable templates give you tools to plan and execute a strategy that connects you with your target audience while keeping your content calendar organized.

How paid advertising can benefit your business

Although paying for ad space can be costly, paid advertising has several benefits over other types of digital marketing:

  • Reach. Paid advertising allows businesses to very quickly reach thousands of people. This guaranteed reach is compelling compared to organic marketing, in which the reach isn’t guaranteed. For context, the average cost to reach 1,000 people on Facebook is about $12 per thousand ad impressions.
  • Targeting. Modern paid advertising provides a wide array of targeting opportunities. This includes behavioral targeting (e.g., serving ads to people who have already visited your site), interest targeting (e.g., serving mountain bike ads to people who’ve shown an interest in mountain biking), and keyword targeting (e.g., serving ads to people who search “mountain bikes”). 
  • Measurement. Paid advertising platforms have built robust measurement tools to help advertisers understand the return on investment (ROI) of their advertising. They use cookies, such as the Meta pixel, to track when users see an ad, click it, and then ultimately convert to making a purchase. They can attribute purchases back to specific campaigns, ads, or keywords, providing powerful insight into the success of paid advertising and into what creative and targeting strategies work best.

4 types of paid advertising

  1. Search engine
  2. Social media
  3. Display
  4. Hybrid

Paid advertising is segmented by the type of channel that shows the ads:

1. Search engine 

When someone searches on a search engine like Google or Bing, they see a combination of organic results (in an order determined by the search engine’s proprietary algorithm) and paid search ads (determined by an ad auction). This is a powerful type of advertising because it allows for specific intent targeting. If a searcher enters “mountain bikes for sale,” they are likely motivated to make a purchase.

2. Social media 

Ads on social media networks like Instagram and TikTok are social media ads. These ads are interspersed with non-ad content in the user experience. Social media advertising is powered by audience data; the networks track their users’ activity on the platform to understand their interests and serve them relevant ads. For example, if you like a post on Instagram about mountain bikes, you are more likely to get served a mountain bike ad. 

3. Display

These ads take a variety of formats, from small, static boxes to large videos. When advertisers run display ad campaigns, they aren’t usually on a single site. Instead, display ads run across a network of sites. 

For example, if an advertiser were to use the Google Display Network to run a campaign on people interested in mountain bikes, their ad could be shown on hundreds of different mountain bike-related websites across the web that have opted into showing ads from Google’s advertisers.

4. Hybrid

Hybrid ad campaigns don’t fit cleanly into search, social, or display categories. The most prominent examples are Google’s Shopping ads. These campaigns take in information about your product or offering and turn them into responsive ads, showing them in a variety of formats across search, social, and display ad placements. They use their algorithms to reformat the ad to meet the context of where it’s shown.

Platforms for paid advertising

Nearly half of all digital ad spend is spent on Google and Meta’s ad platforms. They are the longest-running, most proven advertising platforms. Since they’ve been around for so long, they are mature advertising products, offering robust measurement and a variety of types of ads. 

Consider your options:

Google Ads

Google is known for Google Search Ads, by far the largest part of its paid advertising offering. However, the Google suite of ad products includes Display, YouTube ads (another type of display advertising that includes video ads), and Gmail ads. This suite is complemented by Google’s measurement tools, including Google Analytics and Google Tag Manager, which allow you to track your advertisements’ ROI.

Meta ads (Facebook and Instagram)

Meta is the market leader in social ads. Its platforms include both Facebook and Instagram, which, combined, have more than two billion daily active users across the world. Its campaigns are informed by their proprietary tracking cookie, the Meta pixel, and you can manage them with a Meta Ads Manager account. You can build video, photo, and carousel ads, which are slideshows. 

How to create a paid advertising campaign

  1. Define your target audience
  2. Develop your creative
  3. Configure your tracking
  4. Launch and iterate

Whether you’re spending $10 a day or $10,000, the process to create a paid advertising campaign follows the same four steps:

1. Define your target audience

Paid advertising campaigns start with defining the audience you want to reach. This will inform your decisions about what platforms to use and what types of targeting to implement. Ask yourself where your target customers get their information and what they’re interested in. This will inform what platforms to advertise on when creating your budget plan for your campaigns.

2. Develop your creative

The creative you need to create will be informed by your audience choices. If you focus on search campaigns, you will need to write copy showing you offer the item the searcher is looking for. If you run social or display campaigns, your goal is to develop highly engaging visual creative that immediately catches the user’s attention and showcases your value proposition. Regardless of your audience choices, ensure you have multiple variations of ads to test and learn from.

3. Configure your tracking

Every advertising platform includes tools to measure the success of paid campaigns. It is important to set these up on your website before launch to have a clear picture of success. 

Digital advertising platforms each have their own tracking code that you must add to your site. Shopify has built-in integrations with the most common advertising platforms, including Meta, Google, and Pinterest, that just require connecting your accounts, avoiding the need for you to add code to your site. For other CMS or ad platforms, you may need to ask a web developer to support you.

Each advertising platform will provide dozens of metrics to understand your success. The right metrics for your paid advertising will depend on your goals and business model, but the most common are purchases, clicks, and impressions.

4. Launch and iterate

Once you’ve loaded your target audience information, creative, and budget into your ad platform, you’re ready to launch. One of the benefits of paid ads is how much data you get; within a few days, your campaigns will offer a clear picture of which ads are working and which aren’t. It’s best practice to check your ad campaigns at least once a week to identify opportunities to improve.

Paid advertising FAQ

What is the cost of paid advertising?

APaid advertising campaigns can cost as little as $1 per day with simple text or image ads. However, large brands can spend hundreds of thousands of dollars per day, so there is a wide range of costs.

Do I need to have a website to run a paid advertising campaign?

Yes. Although you can run ad campaigns that send traffic to somewhere other than your site—such as a form or Facebook page—most advertising platforms will request your company’s web address to verify that you are a legitimate business.

Will paid advertising affect my organic search results?

No, paid advertising, including search advertising, has no bearing on organic results. The mechanisms for how ads and organic results show are completely different.



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