Advertising: How Internet advertising works
Site Owners create interesting content about a specific topic. People visit the interesting content. Companies related to this specific topic will then pay the site owner to display advertisements. A portion of the user traffic will follow advertising links and do business with the companies.
To help Site Owners and Advertisers work together, there are Pay-Per-Click companies. These companies act as middlemen. Big Advertisers will go to a Pay-Per-Click company and purchase a large block of impressions. The Pay-Per-Click company will host the advertisement on the websites of the thousands of Site Owners who've signed up. To the Site Owner, Pay-Per-Click companies provide one-stop-shopping for Advertisers.
Some Site Owners work with Advertisers directly. In this case, both parties need to agree upon a means of logging how many ads are shown, how many are clicked on, how many result in sales, and so on. Typically this is done with trusted banner advertising software, similar to the software used by Pay-Per-Click companies.
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