Online advertising offers a true opportunity for brand-to-consumer interaction and a direct connection to a company's business model.

We are past the days of pure experimentation with this medium. It is a proven and crucial component of effective marketing programs, providing the “best of all worlds” in regard to branding and direct response impact.

Yet online advertising is not like television, radio, print or even direct mail advertising, and cannot be approached the same way. To take full advantage of its strengths, marketers must be proficient with the analytics of the medium and the concept of campaign optimization.

Online advertising is rich with data, but unless you know how to use it to consistently optimize performance, the information is worthless. Here is a quick look at the basics.

Set and Communicate Relevant Goals

Before embarking on an online campaign, know the average value of a customer, or even better, the average value by customer segment. This number is critical to the marketing plan and becomes the foundation for targeting and calculating true return on investment.

Communicate this information to your online agency or media partner, creating a benchmark to meet and beat.

Know Before You Go: Test, Test, Test

Before launching any form of online advertising, test the media to ensure a good fit exists with the message and target audience. Commit a relatively small portion of your marketing dollars before deploying the entire budget.

Testing provides an opportunity to determine if the audience will respond and offers real numbers to use when projecting the impact of a larger media buy. A comprehensive test includes multiple websites and ad sizes. Plan to spend at least $5,000 to $10,000 per site and to test each for a two-week period.

For example, Ant Farm Interactive promoted a relatively complicated financial services product, targeting individuals researching auto and home purchases. We conducted tests on several car buying websites, as well as mortgage websites, and produced multiple ads in a variety of sizes, including banners, skyscrapers, power ads, text links and emails.

Results were tracked through a leading ad serving system to determine the best performing sites, placements within these sites, ad types and messages. Ad views, clicks and purchases were monitored. Media and creative were evaluated by the cost per product sold. This metric was then used to refine the plan and the interactive agency extended buys on the best performing sites.

During a two-week sampling period with a limited media buy, marketers can expect the target cost per sale may not be obtainable, and cost per impression will be more expensive. However, by the end of the test period, the cost-per-conversion ratio should be within an acceptable range, approaching your goal.

Ultimately, optimization is an iterative process that reduces costs over time.

Balancing Act: Consider Media AND Creative

Optimizing media OR creative instead of both is a mistake many often make. Experts know the power of breaking down all variables associated with online advertising and optimizing them in concert.

This was demonstrated by a campaign for a travel industry client that included direct-response, traffic-driving, lead generation banners on about 10 sites. The marketing objective was to deliver qualified individuals to the client's website and encourage them to register to receive more information.

SouthernLiving.com was among the top performing sites. Three specific areas within this site were selected for the ongoing campaign--the home page, run of travel and the AOL weekend getaways.

Each day, performance was measured and compiled though the marketing communications firm's ad serving software, helping to determine which areas of the site and which specific creative placements achieved the most conversions. Agency personnel examined the data and made adjustments accordingly, constantly refining the media buy.

At the same time, the creative was evaluated for message effectiveness. On this particular site, two of the eight messages drove the greatest proportion of registrations and as a result, received wider exposure than the other six ads.

The agency also determined the most cost effective ad size and page placement. Constantly refining media and creative resulted in well over a hundred thousand visitors to the website, and reduced the cost per visitor by 48 percent.

Sizing Things Up: Built Smart and Built for Speed

When it comes to online advertising optimization, agency size doesn't matter. What's important is how quickly a firm analyzes campaigns and responds to data.

To ensure speedy analysis, the agency MUST have in-house ad management and Internet ad serving capabilities, as well as the right people at the controls. To achieve rapid response, data regarding results must be actionable and relevant to all those responsible for strategy, media planning/buying and creative.

When evaluating an agency, seek to uncover the processes that lead to their results. To identify an effective online agency, ask how:

• Market research is tied to the creative process.
• Campaign management and media buying functions work closely together.
• Campaign management has direct connections back to the creative department.
• All functions focus on meeting the client's goals and objectives.

While online advertising may seem intimidating to the uninitiated, in reality it offers a better opportunity to evaluate the effectiveness of your program every step of the way. And if you understand the underlying processes, media optimization can help keep agencies and media partners accountable.

Ultimately, interactive marketing can produce enhanced bottom line results with a measurable return on investment.