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Online advertisers have almost as many payment models to choose from as web sites to advertise on. While they may have got their heads around concepts such as pay-per-thousand, pay-per-click and pay-per-lead, some sites are developing their own models, including Guardian Unlimited's surround session (see panel, p28). Traditional thinking is that cost-per-click (CPC) is preferred by advertisers, cost-per-thousand (CPM) by media owners, and that the deal you get depends on who has the upper hand. But it's not that simple. The fact is, the best model will depend on the company, budget and campaign objective, and while cost-per-click might work well for one campaign, cost-per-thousand will be better for another.

As Danny Meadows-Klue, chairman of the Interactive Advertising Bureau, points out: "The unique thing about internet advertising is that while ads in other channels tend to be good at one thing - posters deliver a simple message, press gives details, TV provides rich animation - the internet can do all these things at once. That has been a challenge for marketers who have needed to think very carefully about how this channel fits into the framework of their other communication routes to customers."

This more careful approach has led to some interesting developments.

But for a big brand looking to create and maintain both brand and new product awareness, with a reasonably big budget for several media and less emphasis on direct results such as instant sales, then CPM banner advertising is still going to be a major part of the online strategy.

Sarah Charlton, creative director at digital-marketing agency Moonfish, feels that CPM advertising still has a strong role to play. "If a client wants to promote a product or raise awareness, formats such as banners, skyscrapers and interstitials can provide great impact. We would then look at measuring the impact of the campaign on awareness, message association and intent to purchase - tracking clicks would be secondary. The often-derided banner can be cheap and cost-effective when treated as ambient media."

All of Rivals Digital Media's sports sites sell advertising based on CPM. Matthew Pennington, Rivals' sales director, feels strongly that this is the right model. "We have spent a lot of time, money and effort in building brands that attract desirable and loyal target audiences. These have an inherent value, which shouldn't be undersold for a quick buck." Rivals focuses on creating ad models tailored to each client and results can be impressive. During the World Cup, MasterCard ran a campaign through Universal McCann with a competition to win the trip of a lifetime to the final in Japan. The push ran across Football365 and Rivals.net using banner ads, pop-ups, home page editorial, newsletters and discussion on message boards. The result was 500 to 600 entries to the competition a day and unmeasured increased association of MasterCard with the World Cup.

However, for many advertisers whose crucial result is return on investment (ROI) through increased traffic, sales or information, banners measured by CPM are being replaced. Ben Poole, media manager at Outrider, says the digital agency has noticed a move towards using search engines to target audiences. "About 88 per cent of users rely on searches to visit sites. With more than 300 million searches a day, this should always be at the foundation of a digital-marketing strategy. It can be up to 10 times' more effective in delivering ROI. Travel, personal finance and recruitment work particularly well," he says.

It is with search-related advertising that cost-per-click (CPC) models have come into their own. Firms such as Espotting Media, Overture and BT LookSmart offer their clients advertising slots, which appear in search results based on keywords typed in by users. Clients bid for certain keywords - from 5p up - with the highest bidders appearing further up the listings.

The more words they bid for, the more clients spend. Bidders only pay if users click on their link. These users are probably more valuable than casual clickers, since they will have expressed an interest in the product or service by searching for it in the first place. BT LookSmart claims to have helped Volvo generate more than £5.29 million in revenue and boosted brand awareness by 28 per cent with its push of the Volvo S60. BT used a mix of keyword banners, cost-per-click placements and dhtml, video and audio banners, pop-ups and interactive games.

Chrys Philalithes, UK marketing director at Espotting, says: "Pay-per-click search listings have been a real success for online advertising and marketers are just scraping the surface e of it." She feels the model is just as effective for the smaller commercial player as the bigger brand.

Sunglasses UK used Espotting to increase sales and awareness of its site.

Having registered keywords such as 'designer sunglasses' and 'David Beckham shades', it is now receiving some 2,000 clicks a month at a cost of about 8p a click. Philalithes reports: "Sunglasses UK is converting a staggering 11 per cent of 2,000 clicks a month into people buying sunglasses. The company makes £1,500 a month through Espotting, all from a monthly spend of £150 - an ROI of 1,000 per cent."

James England, managing director of Bluesky Experiences, a small outward-bound corporate-events organiser, is positive about the impact of pay-per-click search advertising on its own marketing, which was co-ordinated by digital-marketing agency Ambergreen on the Overture search network.

"The rise in traffic to the Bluesky site was phenomenal," he says. "In two months, the number of unique users rose from 16 to 1,000 a week- a staggering 1,000 per cent ROI. For every £1 we spent on marketing with Ambergreen, we have received a return of £10."

Tino Nombro, managing director of Ambergreen, points out: "Without a strong brand identity, SMEs are in a weak position against well-known blue-chips. Pay-per-click drives search users to SME sites, where high conversion rates are achievable. The recent case of Lloyds TSB and Google shows this trend is also taken up by blue-chips." Lloyds TSB Insurance recently struck a seven-figure ad deal to ensure prominent space on Google when users type in one of more than 1,000 insurance-related keywords.

Neither firm has disclosed results.

UpMyStreet.com offers advertisers geographical targeting, from individual postcodes to counties. Combined with direct marketing firm CACI's socio-demographic segmentation software, the firm can offer clients segmented audiences from 'wealthy achievers, suburban areas' to 'well-off workers, family areas'. A recent campaign for now-defunct Zurich Bank's online product saw five per cent of the firm's quarterly budget generate seven per cent of the new customers for that period.

A different approach from the US is being trialled at Guardian Unlimited, which involves selling space per user session.

Tristan Leaver, business development manager at Guardian Newspapers, explains: "Surround sessions are an alternative way of buying and selling online media, which moves the metric from impressions to sessions. Users are shown a series of ads from an advertiser, giving them a chance to own the user's time on a site and increase their share of voice" (see panel, p28). This approach suits bigger-budget brand campaigns.

Online sponsorships are another way of creating awareness, although ROI is harder to measure. Many sites, from handbag. com to Football365, offer online advertorials and sponsored sections, but the most clever and arguably most effective deals are those offered by interactive community sites.

At Dubit.co.uk, sponsors can integrate brands in the virtual world of the Dubit inhabitants - a teen market that gives products a 'cool' factor, essential when targeting this market (see panel above). Adam Hildreth, Dubit managing director, explains: "We offer a variety of advertising methods, including character placement, room sponsorship and module-based sponsorship. Budgets start at £5,000. We prefer to work in relationships where we have exclusive arrangements with firms."

If the marketing budget is very tight, and the main purpose of advertising is to generate many sales for as little as possible, viral marketing is an excellent option, which charity War Child opted for with success (see panel, p27). But this depends on an ability to move quickly, as well as imaginative flair.

Perhaps more easy to control and predict, while having the advantage of being cheap and measurable, is email marketing. Ashley Friedlein, chief executive of online networking site E-consultancy, points out: "We placed text ads in third-party newsletters. As the target market is UK e-business professionals, we could be fairly precise. The most successful newsletter was sent to 2,750 people for £45. We got 204 clickthroughs and 56 conversions. So the average cost per acquisition was 80p."

War Child wins donations with witty viral campaign

For a company with a small online budget, viral marketing can be a cheap and highly effective advertising medium.

The best examples are those that show imagination and the ability to act quickly on current tides of opinion.

During autumn 2001, War Child was operating a campaign to raise funds for the aid of refugees in Afghanistan following the events of September 11.

The company employed Wheel Group's Abel & Baker to find a cost-effective means of raising awareness of the campaign and attracting more donations.

Staff at Abel & Baker had seen a lot of the PowerPoint presentations being sent around in the aftermath of September 11, featuring 'comic' images of Bin Laden, Taliban men and so on.

Abel & Baker decided to use the same format, but with the message tailored to War Child's cause.

PowerPoint was a 'lo-fi' solution, intended to look home-made. Charlotte Neser, director of Wheel, parent of Abel & Baker, explains: "Not only was it cheap, but it also added to the impact of the message, as the user expected it to be another joke about the war."

The email was sent to lists of people who had sent the original images to the agency.

The campaign raised unprecedented amounts of money online and was viewed by internet users on four continents.

Traffic to the War Child web site increased from about 100 visits a day to 500.

Online donations rose from an average of £10 a week to £100 a day. The campaign ran for six weeks.

James Topham, head of communications at War Child, says: "The campaign which Abel & Baker ran for us at the end of last year was War Child's first foray into the world of online marketing and it proved revelatory.

It greatly increased traffic to our web site and raised significant funds.

"It was also witty and a change from the usual 'overly worthy' charity marketing. We continue to have a good relationship with Abel & Baker and look forward to doing more exciting and innovative campaigns."

Guardian Unlimited charges BMW by user session

"When the New York Times developed Surround Sessions in 2001, we were keen to develop the idea for the UK market," says Tristan Leaver, business development manager at Guardian Newspapers.

"We have a long tradition of developing opportunities that enable advertisers to communicate with our users with impact and in a cost-effective way," he adds.

The Guardian worked with Zenith Interactive Solutions on the launch of surround sessions for client BMW.

The car firm bought 20,000 user sessions to run on The Guardian's film site (www.guardian.co.uk/film), showcasing BMW's award-winning creative.

Leaver sees Guardian Unlimited as a good match for the motor firm: "BMW has long used our film site to communicate to our users, who offer a sophisticated, discerning audience. BMW chose to use banner creative only, but advertisers have the chance to take button slots and ads within the articles for surround sessions."

BMW showed five ads and used the fifth banner creative as default for all page views that followed. In future, advertisers could limit the session by number of pages, depending on the complexity of the message they wish to deliver. Leaver is positive about the results, though few details of how BMW measured the success of the campaign are available.

Adam Freeman, head of commercial development, says: "Our first surround sessions case study has generated a significant volume of interest from a broad range of agencies and clients. We are expecting to run another two or three session campaigns this year.

"Having completed a successful test of the technology, we can advise on CPM costs and creative. We look forward to developing the concept further.

The sessions would be relevant to any advertiser looking for branding and response."

He says some key lessons were learned from the work: advertisers should use all available creative placements to maximise opportunities for branding and response; and they should think about how they use sequential messaging and showcase their products and services.

Dubit.co.uk spooks teens for sponsor Monsters, Inc.

Of all the advertising models, sponsorship probably causes the most difficulty when it comes to measuring results.

But for a teen product or brand that wants to create a good impression among its fickle target audience, sponsorship and brand association is probably one of the most effective tools in the marketing box.

Community sites, especially one such as Dubit.co.uk, which is actually run by a teenager, offer unique and imaginative opportunities for online sponsorship.

As part of the launch of the Monsters, Inc. DVD and video, Dubit.co.uk's 250,000 registered members were each given a poster in their personal lounge, promoting the film. By clicking on the poster, their apartment was thrown into darkness and screams echoed from the corner of the room.

The community cinema on the site was devoted to the film and the Dubit.co.uk e-zine ran a review of it.

A further email was sent, informing users of the Monsters, Inc. additions to the site.

Pop-up windows on the home page and main chat area drove users to a Monsters, Inc. competition. The winner received a metre-high version of the film's lead character, Sulley.

Adam Hildreth, managing director at Dubit.co.uk, says: "The high-quality graphics on the site reflected well on the Monsters, Inc. brand, and by working with teenagers - as we always do - we came up with a creative campaign.

"It was fun, different and had the added bonus of providing data capture, so Disney could continue to build relationships with the teenagers who responded to the promotion."