The conventional wisdom is that you should focus on Tier 1 traffic only because there is nothing else as lucrative as the users from first-world countries.
While it is absolutely true that a significant amount of traffic has a negative overall margin when focused on a single segment, any media buyer who operates at the level of global campaigns will have to consider several other factors beyond the sheer profitability of a single user.
Defining the differences between traffic tiers
At its most basic level, the division of countries into tiers is purely economic. The most important metric is GDP (in PPP), which shows the average income of a population, adjusted for the cost of living. The countries which comprise Tier 1 are those which have a GDP hovering around the top of the range.
Roughly speaking, it includes the United States, the United Kingdom, Germany, Australia, Canada, and other countries with a similar level of disposable income, credit card adoption, and online purchase behavior.
In short, a user acquired from this tier is more likely to have a credit card on file and be familiar with online purchasing.
The countries which comprise Tier 2 are everything else that is reasonably developed. It includes emerging markets like Brazil, Spain, Poland, Mexico, Turkey, South Africa – large economies with a rising middle class and disposable income, but with a large variance between what different people make.
Internet adoption and e-commerce are both common but not ubiquitous, and consumer markets are generally less mature than in first-world countries – meaning that there are less ingrained buying habits to rely on.
Finally, Tier 3 consists of small-scale economies with large populations, such as most of Southeast Asia, Africa, South Asia, and Latin America.
These countries have a broad but shallow traffic base, meaning that they do not generate many high-value customers but can provide a constant stream of inexpensive clicks.
The cost per acquisition (CPA) from these countries is also low, while the value of an average customer is significantly lower than in Tier 1 countries.
The three tiers are not strictly delineated, and many countries see the characteristics of two of them. For example, both India and Brazil are developing countries, but the Indian middle class is arguably as developed as the Brazilian one.
At the same time, many Indian and Brazilian citizens still live in developing economies. It is important to remember these nuances, as they can have a major impact on media buying at the level of individual segments.
Addressing the nuances of intent
The simple delineation of countries into tiers is useful but only provides a general idea of the potential revenue. To actually monetize users, one must understand their intent. In other words, any traffic acquisition campaign must be built around either transactional or informational intent.
The former refers to users who are actively looking to buy something, compare similar products, or sign up for a service, while the latter describes users who are only browsing.
It may seem obvious that transactional intent is more desirable, but it is misleading to think of informational users as unprofitable. In fact, they are usually much easier to monetize because of the context in which they are viewed.
A user from the UK who browses articles on technology topics has some monetization potential: targeted display ads in relevant articles may have a better chance of being clicked and converted into sales than ads shown to a user with transactional intent but a poor offer fit.
With that said, transactional intent is not a disadvantage. A user with transactional intent will typically have a credit card, a higher average basket size, and fewer financial barriers to purchase.
An Indian user is much more likely to buy something at a lower price using a credit card, while the Nigerian one may have to rely on a mobile money transfer system.
For these users, the friction of the checkout process can be as important as price in determining whether a sale will be completed.
In short, the relative value of transactional and informational intent must be determined on a case-by-case basis, taking into consideration the characteristics of a given country. Monetization potential is determined not by a single metric but by the combination of intent and location.
CPC benchmarks and their limitations
In practice, most buyers will find that a Tier 1 campaign’s costs are much higher than anything else available. Google Ads, for example, typically cost upwards of $2 to $4 per click in the United States, compared to under $0.1 to $0.2 in Tier 3 countries.
It is easy to assume that there is always value in buying cheap traffic, but in reality, most such campaigns have diminishing returns due to extremely low conversion rates. However, that is not an inherent disadvantage of low-tier countries.
The truth is that any company hoping to advertise in the world’s most competitive markets will be forced to pay high prices for traffic at some point. The most competitive markets, in this case, are the first-world countries, where only the most competitive advertisers can buy headroom in the ad space.
Therefore, a company with a serious monetization potential should consider directing a significant portion of its marketing budget to native first-world ad networks.
The high cost of user acquisition is only disadvantageous in the short term when compared to low-tier spam clicks. Once such a campaign is allowed to run for a decent period, its lifetime value (LTV) will almost certainly exceed its cost.
By contrast, most companies which only acquire traffic from low-tier countries are operating in a totally different environment. If you are not willing or able to pay more for first-world traffic, it may limit the monetization opportunities available from the traffic you buy.
A click from a Tier 3 user who only sees value in buying a cheap product from an adult-oriented shopping directory may offer little more value than a click on a Google AdSense banner.
At the same time, it is crucial not to optimize for price at the expense of scale since the two are intrinsically linked. The best way to optimize the balance between scale and cost is to adjust the bids in each region and spend more on larger economies with deeper pockets.
Why you should think of Tier 2 advertising as a separate category?
When it comes to allocating resources, most companies will find that Tier 2 markets are either completely ignored or get a minuscule amount of traffic compared to what is available.
In reality, however, a sudden shift of even a small amount of the marketing budget towards Tier 2 is almost always met with enthusiasm by the sales team.
After all, they are used to selling to companies that mistakenly believe that all their advertising needs to be in the first-world countries. An experienced rep may tell you that Tier 2 buyers only rarely want to invest more than 15-25% of the total budget in the top 25% of available advertisers.
The reason why Tier 2 markets deserve a separate allocation is simple: their CPA efficiency tends to be much better than anything else available. This outcome is entirely contextual and has to do with how much a given market has to pay to get traffic.
If the market conditions are right, the CPA for an insertion order expressed in Tier 2 may simultaneously be cheaper than an equivalent one in Tier 1 and provide a better revenue per action (RPA) than either. This outcome is rare but possible and should not be dismissed simply because it seems economically irrational.
The most common issue which prevents Tier 2 advertising from realizing its theoretical potential is the payment gateway. The reason why credit card payments are so popular in all first-world economies is that they are convenient and trusted.
Few people think about the fact that cards are not always universally available, especially in developing economies.
An Indian or Nigerian user who only browses adult directories would not be able to pay for a product via Visa or Mastercard, simply because there is no local option available.
Local payment options should be considered at the campaign level in order to maximize the value of any advertising spend.
For example, Pix dominates in Brazil and allows for almost instant settlements, while India usesUPI to facilitate financial transfers. SMS and mobile money are the dominant force in many markets where cards are unavailable.
Any company which only offers a credit card payment option in such a market will find the majority of its transactions being canceled at the payment stage, simply because the user lacks the local option.
Some countries which have shop systems already have the third-party payment processors which solve this issue for them. The problem only emerges when a company itself becomes the payment processor and begins to incur all of the costs associated with credit card payments.
Applying creative guidelines to different tiers
While the actual instructions for creatives may seem obvious, their application is nuanced and requires substantial experience. In short, the copy and format of an ad may differ significantly from country to country and even from campaign to campaign.
The reason why this nuance is included in this article is that the same guidelines apply to all tiers. In other words, one should always treat a creative brief as a set of recommendations rather than a strict set of requirements.
The most important guideline for creating effective creatives is to understand the audience in terms of their tolerance for advertisements. First-world users are exposed to hundreds of ads per day, meaning they are much more likely to be annoyed by excessive marketing.
What works in the United States will inevitably fail elsewhere due to cultural differences, but the biggest problem is the oversupply of subpar creatives. Creatives which utilize deception to get the user to click on an adult site will fail spectacularly in the United States because everyone there is aware of such tricks.
The first-world audience has a much higher level of advertising literacy, so most of it is easily identifiable by the most common spam patterns.
T3 often responds best to clear language and direct promotion. The value proposition must be up-front and explicitly state benefits, while the CTA should use time-sensitive offers when applicable.
Most of the mechanics which have fallen out of fashion in the first-world markets still work in many developing countries. T3 users are much more responsive to high-urgency push notifications than their first-world counterparts.
T2 falls in the middle of the spectrum, so there are no hard-and-fast rules about what works and what does not. However, it is worth noting that most creatives which work in the United States will work in T2 as well, but they may not perform as well.
T2 creative testing should focus on finding a competitive baseline against which more expensive experiments can be compared.
Bots, click fraud, and quality assurance
When it comes to traffic quality, it is important to remember that it comes in layers. Some supply sources are much more likely to have bots or otherwise invalid impressions, so any serious media buyer should be aware of these differences and account for them in their operations.
This state of affairs is almost inevitable due to the nature of the business: the cheapest sources will always have the most risks involved.
Click fraud and bots tend to come from the cheapest advertisers, so it is fair to say that Tier 3 campaigns are much more likely to be compromised. Not all of them, of course, but the fact remains that bot traffic is much more prevalent at the bottom of the market.
Fraudulent impressions tend to be much more common at the lowest levels of the market because the sources selling them may operate with fewer restrictions and may misrepresent their traffic’s quality. This observation is not meant to condemn an entire tier, but rather to explain why certain dynamics take place.
One should always be especially wary of click fraud when working with Tier 3. Fraudulent impressions should be filtered out at the lowest possible level, so a simple IP blocklist should suffice in most cases.
More importantly, traffic quality should never be evaluated on a per-click basis, since impressions generated by bots usually do not lead to any conversions. In many cases, engagement with the ad, such as scroll depth or even second-page views, is a much better metric than any post-click behavior.
Lead funnel considerations
It is generally a bad idea to use the same marketing playbook in different markets because the audience, the local economy, and the advertising environment are all unique.
This consideration is especially relevant to the length of the lead funnel: what works in Tier 1 will almost certainly fail elsewhere due to the audience’s impatience.
There is no strict definition of a long lead funnel, but it typically involves substantial nurturing over several days. In many ways, it is a Tier 1-specific feature which is poorly received elsewhere due to the audience’s lack of interest in slow, drawn-out sales processes.
Long email sequences are an example of such a funnel, where the customer receives information about the product in installments over the course of a week or more. This approach is often used to sell high-priced items, such as B2B software, or to encourage users to invest more money into the product.
It is especially useful when there is no apparent reason for the purchase, which is common for most of the adult market. First-world users, in particular, may be more receptive to a gradual sequence of reminders before finalizing a sale.
On the other hand, a short funnel is the only realistic way to acquire customers in T3. The most important aspect of acquiring users in developing countries is to get them to the product as quickly as possible.
In many cases, SMS or push notification channels are much more effective than email, which rarely has an impact on the users’ behavior.
The same goes for product positioning: the benefits must be explained clearly and concisely, without asking the user to do anything complicated in the process. There is often limited time and attention available, which should shape every aspect of marketing in these countries.
Funnels in T2 are somewhere in the middle, so it is important not to generalize when designing them. Some localities and industries respond much better to short sequences than others, so the most important rule is to experiment with lengths and see which ones work in a particular case.
Thinking in terms of a portfolio
The key idea behind this guide is to help you formulate a profitable marketing strategy by thinking about your options in terms of a portfolio. Most buyers fail to understand that any viable strategy will contain assets from each tier.
The three traffic tiers function much like individual securities, which have different expected returns and volatility.
Your Tier 1 traffic should be thought of in terms of a stock: it is the most profitable but also the most volatile type of marketing there is. Its value tends to increase significantly when managed correctly but decreases rapidly when poorly optimized.
Your Tier 2 traffic should be considered a bond, a stable source of yield which requires little in the way of maintenance but continues to provide consistent returns over time.
Finally, Tier 3 is the equivalent of a high-yield note, where the expected return is much higher than the market average, but the risks are also significantly increased. Tier 3 is a higher-risk, potentially higher-reward category, but it has limitations: while it can boost overall performance, it rarely plays a meaningful role in any large-scale monetization strategy.
Most domains, particularly those in the adult industry, are highly dependent on first-world traffic and should treat it as their main asset.
In short, you should think of these traffic tiers as distinct but interconnected channels which must be carefully balanced to realize the highest potential returns. There is no single ideal strategy, as it should always be adjusted to the particular circumstances of a given case.
