The most common pricing model for banner ads is cost per thousand impressions (M is the Roman numeral for 1,000) or CPM. An impression is counted when a visitor views a page on which an ad is displayed, regardless of whether the visitor clicks on the ad.
Cost per impression, or CPI, is basically the same metric: Divide the CPM by 1,000 to get the cost per impression.
Cost per action (CPA) pricing is any formula in which advertisers pay not for viewership but when visitors perform a certain action in response to the ad, such as filling out a registration form, entering a contest or making a purchase. Advertisers often like this pricing model because they pay only for measurable results; they pay per customer action.
The strategy might be risky for you, though. A poorly designed ad might not generate any clicks, so you'd end up not making money because of your advertiser's poor design or copywriting abilities. Keep in mind, too, that the site being advertised on is usually expected to track customer actions; advertisers do not have access to the site's log files or to the information provided by the ad serving company, if there is one.
Cost per click (CPC), a form of CPA pricing, is a good pricing model for sites just starting out. Because there's less risk to the advertiser, this model is often more appealing to advertisers who haven't done business with you before. After your site gains momentum and begins to show more value in terms of traffic and number of advertisers, you can graduate to CPM or CPI pricing.
CPM and CPI pricing make the most sense when branding and/or customer awareness are among the ad's objectives, and when advertisers know they're reaching a highly qualified and desirable audience regardless of whether any immediate action is taken. After determining whether you'll base your rates on CPA, CPC, CPM or CPI, you'll take that information and develop your rate card and online media kit.
Decide on the minimum number of pages an advertiser can contract for and whether you'll allow discounts. Depending on site traffic, you might make the minimum number of impressions purchased from 100 to 10,000. Also, many popular sites offer volume, frequency and/or ad agency discounts. Agencies receive a discount to encourage repeat orders.
Flying the Banner
Before you begin selling ads, you'll need a mechanism for displaying banners on your site.
Banner ad rotation software, such as Open AdStream, lets you set up and maintain multiple ad rotations so all your advertisers receive equal treatment. The software can control how often and where a particular ad appears on your site, based on how much the advertiser paid. Prime page locations cost more.
Most of these software packages feature sophisticated tracking features that enable you to offer your advertisers complete ad performance reports at the end of a campaign.
Banner ad networks, such as DoubleClick or 24/7 Media work on your behalf to sell and serve your advertising inventory. Ad networks can simplify banner ad sales for those who lack the time or the expertise to handle administrative and sales functions necessary for a full-scale banner ad effort.
Wednesday, January 21, 2009
Ready To Sell Banner Ads On Your Site?
By Julie Martin
Before you can sell banner ads on your site, you'll need to determine who's visiting your site and who would want to advertise to this audience. And how do you know if you have enough traffic to attract advertisers?
Following are some guidelines to help you determine if selling ads on your site is feasible and, if it is, tips on how to price your ads and serve them on your site.
Targeting Audience, Advertisers
The first thing you need to ask is, "Who are my visitors and potential advertisers?" Site visitors and site advertisers are not necessarily the same.
Consider an online art gallery whose primary visitors include art buyers and the artists selling art on the site. Which of these groups would be the best advertisers? Probably neither. The best advertisers would be businesses that want to reach these two groups. They might include online art supply stores and frame shops.
Content is king. Content can mean interesting articles "How to Market Your Art" might appeal to the artists as well as useful services, perhaps an escrow service to benefit buyers. Now that you've identified your visitors, you need to develop content that appeals to them.
Why? Because the better the content, the higher the traffic and the more impressive your traffic numbers will be when you solicit other businesses to buy advertising. And the type of content on your site reveals something about the interests of the people who visit it.
This is valuable information; advertisers want to know the audience they reach.
It helps if your site has features that drive visitors to categorize themselves according to their interests and that help them easily find the content they want. The features will help you identify the most popular content and possibly charge higher ad rates for those pages. In addition, they can help you continue to produce relevant, attractive content that keeps people coming back.
Looking Good
Where your visitors come from, how they arrive and where they go on your Web site are very important for making your site look attractive to advertisers. Repeat traffic, usually visitors who have bookmarked the site, is extremely desirable because it means viewers will see ads more than once.
Frequency of exposure to an ad increases the probability that a viewer will click on it. And if you know where your visitors come from, that helps advertisers target their ads. You can track visitors' IP addresses and use them to help determine what part of the country visitors live in and/or which company they work for.
You'll need to gather demographic information to help advertisers target their ads and know they'll reach the right audience.
Smaller sites can use online surveys to encourage visitors to share valuable information with them that can be used to develop a detailed user profile.
Larger Web sites with more traffic might consider hiring an independent auditing company to profile their audience on an annual basis. This verifies that their demographic information is accurate and nonbiased.
Rates are typically based on the number of page impressions served up by the site, as well as by the server architecture used. Prices start around $900 (U.S.) per site traffic audit. Some auditing services charge a set-up fee.
For auditing information, visit the Audit Bureau of Circulations, BPA International or Nielsen Media Research.
What You're Worth
Ad rates are based on several factors, one of the most important being the amount of traffic your site receives. Advertisers and agencies usually seek sites at least 6 months old that receive 500,000 or more impressions per month.
Don't despair if your Web site doesn't have quite this much traffic. Although sites with huge amounts of traffic generally can command higher rates, niche sites that have a highly targeted and desirable audience still attract advertisers.
A common banner ad package consists of 100,000 impressions and costs from $20 to $100 per thousand impressions. Rates from $25 to $70 cost per thousand (CPM) are average for popular sites. Remember, most sites have repeat visitors, and most visitors view more than a single page per visit, so 100,000 impressions might represent 10,000 to 30,000 unique visitors.
In some cases, impressions are guaranteed; in others, they are estimated. Some sites will charge a flat rate for estimated impressions. If the delivered impression count is higher, some sites let their advertisers keep the "overdeliveries" at no extra charge.
Other factors that affect banner ad rates include:
* Banner size. Industry standard banners sizes are 468 x 60 pixels and 234 x 60 pixels. Larger banners cost more. You can put a limit on banner file sizes(7 kilobytes [KB] to 10 KB, for example) to keep download times to a minimum.
* Supply and demand. Ad space on sites that appeal to a prime target audience can fetch a higher price than space on sites targeting a broad, general audience. Depending on your industry, your site's branding and the availability of your inventory, you can develop an appropriate fee structure.
* Competitors' rates. The best starting point for determining what to charge advertisers is to learn what sites similar to yours charge. If you feel you can afford it, you might want to offer a slightly better price at first to attract business. The easiest way to do this is to call a company and ask. Companies serious about business list phone numbers on their Web sites.
* Audience profile. The more targeted your audience profile, the more you can charge. The more targeted your advertising is, the more you can charge. For example, on the Wall Street Journal's site, you'd pay $64 CPM for advertising on a specific site within WSJ.com, $79 CPM for running a banner ad to coincide with editorial content on that site that appeals to certain viewers, and $98 CPM for targeting your audience based on profession, gender, industry or company size (rates effective July 7, 2000).
* Statistics. If you can show advertisers visitor return rates, average length of visit, average pages viewed per visit, click-through rates, viewer-to-customer conversion rates and so on, you can give them a feel for the loyalty of your site visitors. This justifies higher pricing. You can get this information by using traffic analysistools.
Before you can sell banner ads on your site, you'll need to determine who's visiting your site and who would want to advertise to this audience. And how do you know if you have enough traffic to attract advertisers?
Following are some guidelines to help you determine if selling ads on your site is feasible and, if it is, tips on how to price your ads and serve them on your site.
Targeting Audience, Advertisers
The first thing you need to ask is, "Who are my visitors and potential advertisers?" Site visitors and site advertisers are not necessarily the same.
Consider an online art gallery whose primary visitors include art buyers and the artists selling art on the site. Which of these groups would be the best advertisers? Probably neither. The best advertisers would be businesses that want to reach these two groups. They might include online art supply stores and frame shops.
Content is king. Content can mean interesting articles "How to Market Your Art" might appeal to the artists as well as useful services, perhaps an escrow service to benefit buyers. Now that you've identified your visitors, you need to develop content that appeals to them.
Why? Because the better the content, the higher the traffic and the more impressive your traffic numbers will be when you solicit other businesses to buy advertising. And the type of content on your site reveals something about the interests of the people who visit it.
This is valuable information; advertisers want to know the audience they reach.
It helps if your site has features that drive visitors to categorize themselves according to their interests and that help them easily find the content they want. The features will help you identify the most popular content and possibly charge higher ad rates for those pages. In addition, they can help you continue to produce relevant, attractive content that keeps people coming back.
Looking Good
Where your visitors come from, how they arrive and where they go on your Web site are very important for making your site look attractive to advertisers. Repeat traffic, usually visitors who have bookmarked the site, is extremely desirable because it means viewers will see ads more than once.
Frequency of exposure to an ad increases the probability that a viewer will click on it. And if you know where your visitors come from, that helps advertisers target their ads. You can track visitors' IP addresses and use them to help determine what part of the country visitors live in and/or which company they work for.
You'll need to gather demographic information to help advertisers target their ads and know they'll reach the right audience.
Smaller sites can use online surveys to encourage visitors to share valuable information with them that can be used to develop a detailed user profile.
Larger Web sites with more traffic might consider hiring an independent auditing company to profile their audience on an annual basis. This verifies that their demographic information is accurate and nonbiased.
Rates are typically based on the number of page impressions served up by the site, as well as by the server architecture used. Prices start around $900 (U.S.) per site traffic audit. Some auditing services charge a set-up fee.
For auditing information, visit the Audit Bureau of Circulations, BPA International or Nielsen Media Research.
What You're Worth
Ad rates are based on several factors, one of the most important being the amount of traffic your site receives. Advertisers and agencies usually seek sites at least 6 months old that receive 500,000 or more impressions per month.
Don't despair if your Web site doesn't have quite this much traffic. Although sites with huge amounts of traffic generally can command higher rates, niche sites that have a highly targeted and desirable audience still attract advertisers.
A common banner ad package consists of 100,000 impressions and costs from $20 to $100 per thousand impressions. Rates from $25 to $70 cost per thousand (CPM) are average for popular sites. Remember, most sites have repeat visitors, and most visitors view more than a single page per visit, so 100,000 impressions might represent 10,000 to 30,000 unique visitors.
In some cases, impressions are guaranteed; in others, they are estimated. Some sites will charge a flat rate for estimated impressions. If the delivered impression count is higher, some sites let their advertisers keep the "overdeliveries" at no extra charge.
Other factors that affect banner ad rates include:
* Banner size. Industry standard banners sizes are 468 x 60 pixels and 234 x 60 pixels. Larger banners cost more. You can put a limit on banner file sizes(7 kilobytes [KB] to 10 KB, for example) to keep download times to a minimum.
* Supply and demand. Ad space on sites that appeal to a prime target audience can fetch a higher price than space on sites targeting a broad, general audience. Depending on your industry, your site's branding and the availability of your inventory, you can develop an appropriate fee structure.
* Competitors' rates. The best starting point for determining what to charge advertisers is to learn what sites similar to yours charge. If you feel you can afford it, you might want to offer a slightly better price at first to attract business. The easiest way to do this is to call a company and ask. Companies serious about business list phone numbers on their Web sites.
* Audience profile. The more targeted your audience profile, the more you can charge. The more targeted your advertising is, the more you can charge. For example, on the Wall Street Journal's site, you'd pay $64 CPM for advertising on a specific site within WSJ.com, $79 CPM for running a banner ad to coincide with editorial content on that site that appeals to certain viewers, and $98 CPM for targeting your audience based on profession, gender, industry or company size (rates effective July 7, 2000).
* Statistics. If you can show advertisers visitor return rates, average length of visit, average pages viewed per visit, click-through rates, viewer-to-customer conversion rates and so on, you can give them a feel for the loyalty of your site visitors. This justifies higher pricing. You can get this information by using traffic analysistools.
Monday, January 19, 2009
What is CPM, CPC, CPA and CTR ?
CPM means Cost Per Thousand. (M is the Roman numeral for thousand â€" and so Cost Per Thousand).
This is the amount you will pay the ad-network or website publisher to show your ad a thousand times on their website or across their ad-network.
Whether your ad is shown only once to each visitor (Unique Impressions) or any number of times â€" is something that you will have to work out with the nad-network or the website.
CPM rates were once (pre yr 2000 bubble-burst era) as much as $75, but have now dropped to as little as $1 CPM.
CPC
CPC means Cost Per Click. This is how much you would pay the ad-network or website every time a visitor clicks on your banner. CPC rates can be as high as $3 per click or as little as 5 cents per click. It depends on your product and your market - amongst other factors, the more competition there is â€" the higher you will probably end up paying as you compete with competitors.
CPA
CPA means Cost Per Action. The Action could be any of the following types of actions â€" A visitor clicking on your banner coming to your site and filling up a simple enquiry form (CPR â€" Cost Per Registration) , or if the visitor makes a purchase (CPS â€" Cost Per sale). It could be a flat fee or a percentage commission of the sale made. Affiliate-Networks like www.commissionjunction.com , www.linkshare.com and www.clickbank.net have very good software systems in place to track all this and provide statistics to online merchants and publishers on their network of websites.
I have explained in detail what an Affiliate Network is, in another section. They basically, allow publisher websites to sign up for free so they can start earning commissions on sales arising out of the traffic they send to online merchants. The Affiliate Network tracks all this using their system and code merchants and publishers are required to place on their website. Publishers can sign up for free mostly, and in some cases online Merchants are required to pay a one time setup fee and possibly a monthly fee with commissions â€" eg. As in commissionjunction.com . A very popular site that is free to Merchants is Clickbank.com network.
CTR
CTR is Click Through Rate. This is the percentage rate at which people click on your ad banner. If your banner ad is seen by 100 people but clicked by one person â€" then it’s CTR is 1% or .01
Similarly, if your ad banner is seen 100,000 times and in the same time period it is clicked 2000 times â€" then your banner CTR is 2% or .02 .
This is how we calculate CTR …
(Number of Clicks / Number of impressions) x 100
Example, for above case it would be â€"
(2000 / 100,000) x 100 = .02
CPM, CPC or CPA … which is best for my ad campaign?
Your choice will depend on various factors. Sometimes companies such as Pepsi, would just like to enforce their brand and be seen across many websites, without any need for the user to click on their banners. This is a brand hammering strategy, and a CPM deal would be preferred.
Apart from the above mass branding effort, the decision to go for a CPC, CPM or CPA ad becomes a calculated decision when you have a product that you want to sell on your website.
Would you pay the publisher for only visitors he sends you? or would you pay him for every thousand ads he displays for you?or would you pay him a commission on sales from visitors he sends you?
This is tricky. You may need to read the paragraphs below slowly, or even several times over to get the gist of what I am saying …
To help you decide, you should first run a pilot CPM campaign that will help you gauge results. Your CPM campaign and number of Clicks on your banner, will let you know exactly what your CTR (Click through Rate) is for your banner.
Your CTR will help you decide your campaign type - CPM or CPC ? If your CTR is high, you should go in for a CPM, if its low you should go in for a CPC.
The reason for this is simple. If you have a low CTR then you would rather only pay for the low traffic that comes to your site. If your CTR is high , then you don’t mind paying CPM - because your cost will not escalate for more and more visitors that come to your site, but will remain the same.
I will explain the above, with a couple of examples -
Example 1
Lets suppose a website that you want to advertise on charges a CPM of $5.00 and a CPC of 50 cents.
And, you need to decide if you should go in for CPM or CPC ?
Lets suppose you first buy 1,000,000 impressions.
This works out to $5000 ($5 per 1000 impressions x 1000)
Now lets suppose your CTR is not good and is 0.2 % (or 2 clicks per 1000 ads)
Now, you need to calculate the amount you will pay of you had bought a CPC.
If your CTR is 0.2% and you display 1,000,000 ads, then this works out to …
.002 x 1,000,000 = 2000 clicks.
So essentially you have paid $5000 for 2000 clicks or $2.50 per click!!
This means that I am better of buying on a CPC basis, because one click there costs me only 50cents! And if I go for CPC, then I will get 10,000 clicks for $5000 … which is 5 times more than the clicks i get in the CPM model (2000).
Example 2
Lets assume that your banner ad turns out to be very good and gets a very good CTR of say 5%
Now you need to decide ..CPM or CPC.
Lets analyze as above -
I paid $5000 for 1,000,000 ads at 5% CTR
That means 5% x 1,000,000 ads were clicked on , which equals
= .05 (5%) x 1,000,000 = 50,000 clicks!
So for $5000 i got 50,000 clicks.
Now, if I had bought on a click basis, then at the CPC rate of (50cents) I will pay
50,000 x $0.50 amount for 50,000 clicks, which is $25,000 (5 times what I would pay with CPM, for the same traffic)
So, I am better of buying with a CPM system for this banner ad campaign
What about CPA ?
I have dedicated a separate chapter for this. This system is gaining popularity slowly. It seems to be the fairest system of all the three methods â€" specially when you are selling a product or service. Both Google and Yahoo are leaning towards taking their CPC system into a more fair and measurable CPA system. Google has recently launched Google Analytics and Google’s version of PayPal (Google Checkout) - that is a positive and firm step towards its CPA plans. Selling ad-space on your website - how much can you charge?
Nowadays CPM rates have fallen from highs of $50 to $10 to $2 in many cases.
If you have high traffic you may approach ad-networks, and they will serve out the ads for your website. They will give you a piece of code to insert into the pages of your website. You will get a Username and Password to login to a control panel area on the ad-networks main website, to see how your site is performing. Ad-networks pay you based on CPM or CPC, depending on what their client (the advertiser) opt for. They will take from 40% to 60% commission. This is acceptable, considering the fact that they get you the clients and revenues, and they have to manage all the advertising technology and payment systems.
Most of these ad-networks require that you have a certain number of impressions per month to qualify to become part of their network of websites. For example, DoubleClick requires at minimum 5 million monthly page impressions. There are many mid sized networks, like www.Advertising.com , www.fastclick.com , www.ValueClick.com (only CPC, owned partially by DoubleClick) and even smaller ad networks like, www.burstnet.com . You should visit www.adbalance.com to get a complete list and brief on popular ad networks.
Banner Management Software
If you would like to manage your own Clients and their banner ads for your website, you will need to develop an ad-serving engine or license a third party engine and install it on your website. You can get a list of free and paid software scripts that you can install on your website from www.cgi-resources.com or www.hotscripts.com
Author :Vishal Lamba
This is the amount you will pay the ad-network or website publisher to show your ad a thousand times on their website or across their ad-network.
Whether your ad is shown only once to each visitor (Unique Impressions) or any number of times â€" is something that you will have to work out with the nad-network or the website.
CPM rates were once (pre yr 2000 bubble-burst era) as much as $75, but have now dropped to as little as $1 CPM.
CPC
CPC means Cost Per Click. This is how much you would pay the ad-network or website every time a visitor clicks on your banner. CPC rates can be as high as $3 per click or as little as 5 cents per click. It depends on your product and your market - amongst other factors, the more competition there is â€" the higher you will probably end up paying as you compete with competitors.
CPA
CPA means Cost Per Action. The Action could be any of the following types of actions â€" A visitor clicking on your banner coming to your site and filling up a simple enquiry form (CPR â€" Cost Per Registration) , or if the visitor makes a purchase (CPS â€" Cost Per sale). It could be a flat fee or a percentage commission of the sale made. Affiliate-Networks like www.commissionjunction.com , www.linkshare.com and www.clickbank.net have very good software systems in place to track all this and provide statistics to online merchants and publishers on their network of websites.
I have explained in detail what an Affiliate Network is, in another section. They basically, allow publisher websites to sign up for free so they can start earning commissions on sales arising out of the traffic they send to online merchants. The Affiliate Network tracks all this using their system and code merchants and publishers are required to place on their website. Publishers can sign up for free mostly, and in some cases online Merchants are required to pay a one time setup fee and possibly a monthly fee with commissions â€" eg. As in commissionjunction.com . A very popular site that is free to Merchants is Clickbank.com network.
CTR
CTR is Click Through Rate. This is the percentage rate at which people click on your ad banner. If your banner ad is seen by 100 people but clicked by one person â€" then it’s CTR is 1% or .01
Similarly, if your ad banner is seen 100,000 times and in the same time period it is clicked 2000 times â€" then your banner CTR is 2% or .02 .
This is how we calculate CTR …
(Number of Clicks / Number of impressions) x 100
Example, for above case it would be â€"
(2000 / 100,000) x 100 = .02
CPM, CPC or CPA … which is best for my ad campaign?
Your choice will depend on various factors. Sometimes companies such as Pepsi, would just like to enforce their brand and be seen across many websites, without any need for the user to click on their banners. This is a brand hammering strategy, and a CPM deal would be preferred.
Apart from the above mass branding effort, the decision to go for a CPC, CPM or CPA ad becomes a calculated decision when you have a product that you want to sell on your website.
Would you pay the publisher for only visitors he sends you? or would you pay him for every thousand ads he displays for you?or would you pay him a commission on sales from visitors he sends you?
This is tricky. You may need to read the paragraphs below slowly, or even several times over to get the gist of what I am saying …
To help you decide, you should first run a pilot CPM campaign that will help you gauge results. Your CPM campaign and number of Clicks on your banner, will let you know exactly what your CTR (Click through Rate) is for your banner.
Your CTR will help you decide your campaign type - CPM or CPC ? If your CTR is high, you should go in for a CPM, if its low you should go in for a CPC.
The reason for this is simple. If you have a low CTR then you would rather only pay for the low traffic that comes to your site. If your CTR is high , then you don’t mind paying CPM - because your cost will not escalate for more and more visitors that come to your site, but will remain the same.
I will explain the above, with a couple of examples -
Example 1
Lets suppose a website that you want to advertise on charges a CPM of $5.00 and a CPC of 50 cents.
And, you need to decide if you should go in for CPM or CPC ?
Lets suppose you first buy 1,000,000 impressions.
This works out to $5000 ($5 per 1000 impressions x 1000)
Now lets suppose your CTR is not good and is 0.2 % (or 2 clicks per 1000 ads)
Now, you need to calculate the amount you will pay of you had bought a CPC.
If your CTR is 0.2% and you display 1,000,000 ads, then this works out to …
.002 x 1,000,000 = 2000 clicks.
So essentially you have paid $5000 for 2000 clicks or $2.50 per click!!
This means that I am better of buying on a CPC basis, because one click there costs me only 50cents! And if I go for CPC, then I will get 10,000 clicks for $5000 … which is 5 times more than the clicks i get in the CPM model (2000).
Example 2
Lets assume that your banner ad turns out to be very good and gets a very good CTR of say 5%
Now you need to decide ..CPM or CPC.
Lets analyze as above -
I paid $5000 for 1,000,000 ads at 5% CTR
That means 5% x 1,000,000 ads were clicked on , which equals
= .05 (5%) x 1,000,000 = 50,000 clicks!
So for $5000 i got 50,000 clicks.
Now, if I had bought on a click basis, then at the CPC rate of (50cents) I will pay
50,000 x $0.50 amount for 50,000 clicks, which is $25,000 (5 times what I would pay with CPM, for the same traffic)
So, I am better of buying with a CPM system for this banner ad campaign
What about CPA ?
I have dedicated a separate chapter for this. This system is gaining popularity slowly. It seems to be the fairest system of all the three methods â€" specially when you are selling a product or service. Both Google and Yahoo are leaning towards taking their CPC system into a more fair and measurable CPA system. Google has recently launched Google Analytics and Google’s version of PayPal (Google Checkout) - that is a positive and firm step towards its CPA plans. Selling ad-space on your website - how much can you charge?
Nowadays CPM rates have fallen from highs of $50 to $10 to $2 in many cases.
If you have high traffic you may approach ad-networks, and they will serve out the ads for your website. They will give you a piece of code to insert into the pages of your website. You will get a Username and Password to login to a control panel area on the ad-networks main website, to see how your site is performing. Ad-networks pay you based on CPM or CPC, depending on what their client (the advertiser) opt for. They will take from 40% to 60% commission. This is acceptable, considering the fact that they get you the clients and revenues, and they have to manage all the advertising technology and payment systems.
Most of these ad-networks require that you have a certain number of impressions per month to qualify to become part of their network of websites. For example, DoubleClick requires at minimum 5 million monthly page impressions. There are many mid sized networks, like www.Advertising.com , www.fastclick.com , www.ValueClick.com (only CPC, owned partially by DoubleClick) and even smaller ad networks like, www.burstnet.com . You should visit www.adbalance.com to get a complete list and brief on popular ad networks.
Banner Management Software
If you would like to manage your own Clients and their banner ads for your website, you will need to develop an ad-serving engine or license a third party engine and install it on your website. You can get a list of free and paid software scripts that you can install on your website from www.cgi-resources.com or www.hotscripts.com
Author :Vishal Lamba
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