Pay Per Click (PPC) Ads

Search engines like Google, Microsoft, and Yahoo! sell traffic on a cost per click basis. Ads are ranked based on the combination of cost per click * the expected CTR.

Benefits

* You gain instant market feedback from clean traffic sources, which helps you discover which keywords convert well for and are valuable to your business.
* You can use this traffic to test and tweak your site to improve consumer response rates and your effective value per visitor.

Drawbacks

* Many new advertisers either drastically underbid and get no exposure or overbid and lose a lot of money. If you are not careful you can lose a lot of money before you start making money.
* You are forced to keep paying for every click, and once the visitor leaves they may not return.
* Since auctions are based on efficient markets in some industries it can be hard to build a sustained competitive advantage. As you and competitors get more efficient much of your profits are sent to search engines.

Contextual Ads

These ads try to understand the context of a page and create ads that match that topic. Many of these ads sold by search companies like Google (through their AdSense program) while a number of other smaller players like Chitika also sell ads

Benefits

* These ads rarely get clicked on (relative to search ads) so they often are sold below a fair market value and offer a great opportunity for spreading branding messages on the cheap.
* Some networks not only target ads by keyword, but also let you buy ads targeted to premium publisher websites for far less than you would pay if you had to buy them direct from the publisher.

Drawbacks

* Since these rarely get clicked on it can take a while to get enough feedback to have it be meaningful.
* Some ad networks, like Google, automatically opt you into getting exposure on low value high traffic sites like MySpace. Many new advertisers fail to realize how much of their budget is wasted on these non-converting high traffic sites.

Affiliate Programs

Affiliate programs allow you to buy exposure for your business, and only pay affiliates for traffic that drives conversions.

Benefits

* Since you only pay affiliates when they convert these ads can drive a lot of free brand exposure.
* Since affiliates only get paid if a customer converts most affiliates tend to aggressively integrate affiliate offers into their sites, driving a lot of traffic to your site.

Drawbacks

* If you do not have a clear affiliate policy you may find your affiliates competing directly against you and driving up your costs.
* Some affiliates are sleazy and will damage your brand if they think it will help them make a dollar. Consumers and competitors may hold your brand responsible for the actions of your affiliates.










Text Link Ads

Text Link Ads are typically static text links integrated into websites.

Benefits

* Most text links are sold on a flat monthly price, so you know your costs up front.
* In addition to driving direct targeted traffic, these links can offer SEO benefits, helping to boost your organic search engine rankings. This is especially useful if you are close to the top of the organic rankings but still need a bit more of a boost.

Drawbacks
Some publishers sell too many ads and/or lack editorial integrity (selling links to off topic sites) and end up getting their ability to pass PageRank stripped.