Calculating ad revenue

Marketing
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2 separate questions regarding how to figure out advertising revenue (meaning specifically what formulae to use):

FIRST: Assuming my site received 1 million page views per month, and assuming there’s a 0.5% “conversion rate” (meaning page viewers who will actually click on one of the adsense ads) and assuming that each click is worth say 25 cents:

1 million views x .005 clicks/views x $0.25 cents/click = $1250/month

BUT then, should I also multiply by 4 (number of google adsense ads per page)? And then should I multiply by the number of pages that show the adsense ads?

SECOND: What is the formula for figuring out revenue from CPM banner ads?
Say 1 million views x $3 avg. CPM = $3000 - but that’s just per ad, right? If I have say 2 banner ads with the same CPM located at different spots on the same page, then the total revenue would be $6000, right? How about if I have “rotating” ads meaning that the banner displays multiple ads in a row during a single page view, depending on the length of time that the visitor stays on the page - how to account for that in the formula, if that is possible?

I know that many will quibble with the numbers, but for now I am just interested in figuring out the correct formulas first so lets try to stick to that please. If the formulas are correct, it makes much more sense for a web publisher to concentrate on increasing banner ad revenue than adsense revenue.

But just FYI as far as the numbers go, I got the avg. $3 CPM for banner ads figure for ad networks, and the .05% avg. conversion rate figure for google adsense ads from various discussion groups.

Yes, yes, I know each site is different and the viewers have different habits/practices and these averages are probably just BS.

Just FYI my site is going to be about gadget & personal technology - better than Gizmodo, more like T3 and Stuff. I have read about ridiculous figures like AdRelevance Sample Rate Card showing $50 CPM for tech sites but I think that’s BS especially nowdays though the recent news says ad revenue on the web is on upswing . . .

EXTRA CREDIT QUESTION: I am still trying to figure out additional potentials sources of revenue & would appreciate your comments on them:

  1. Amazon feeds (reliable affiliate but I don’t like the fact that user would eventually go to the Amazon site - and why wouldn’t he just go there first anyway?)
  2. Co-branded comparative shopping engine - like it but Bizrate doesn’t offer affiliate program anymore. Pricegrabber?
  3. PPC search engine acting as a “catalog” of goods - haven’t quite figured out this biz model yet.
  4. Others?

Your responses will count for 100% of your final grade in this class (wink wink)

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I know you don’t want to hear this, but those are three gigantic assumptions.

That would depend what your “conversion rate” is an estimate of. My guess would be no.

Definitely not. If your site has a million page views per month, that’s how many ads you’re showing. The number of pages doesn’t come into it.

Right. But in practice, few advertisers will let you run their CPM ad on the same page as another CPM ad. Most CPM ads are restricted to “above the scroll” and you can only use one of those per page.

You also need to keep in mind that you won’t have a 100% fill rate for paid CPM ads. In fact, even using a combination of different ad networks, you’ll probably fill less than half of your pageviews with CPM ads.

There’s no point in accounting for that, because doing so would get you kicked out of any ad network.

IMHO those numbers are both shockingly, amazingly wrong. I haven’t seen a $3 CPM banner ad since 2000, and I’m not sure anyone has a valid estimate of AdSense clickthroughs - it depends very much on the site and the topic and the ad bidders and…

A more realistic assumption in the current market would be $0.50.

Banner ads beat AdSense by a wide margin on two of my sites. AdSense beats CPM by an even wider margin on two others. It depends very much on the topic and the audience. Categorical comparisons between the two are meaningless outside a specific site’s context. (And two banners per page is not likely to be practical.)

My guess is that AdSense will dramatically outperform CPM ads on this particular site.

I have no particular insight about #1 to #4, sorry. Best of luck with your new site, though!

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[QUOTE=moncur]I know you don’t want to hear this, but those are three gigantic assumptions.

Yeah its just an exmple to make the math easier, but after checking out my competition, and based on my personal background & access to industry information & writing ability, I think my site CAN pull in a million pageviews per month (especially if various news aggregators pick it up). Then If I manage to show a few ads with $.50 CPM on the entire site = $30 grand/year. I am very satisfied with even half that amount esp. since it that’s all I need while I pursue some other interests & still support myself., and then there’s the brand value being built up over time ( I got a GREAT domain name) etc. so 10years from now we’ll see how it went.

Anyway, won’t hurt much to try.

Thanks for your insights.

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I wish you luck but I think you’ll be incredibly disappointed.

Most CPM advertisers will not let you place 4 other CPM ads on the page at the same time as their ad is on the page.

More realistic math would be:
1 million pageviews/month = 12 million pageviews/year
12 million/1000*$.50=$600 in one year

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It’s more like 6000

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That’s my rent money for a nice beach front bungalow in Thailand -
Cool!

Perhaps a combination of CPM banners, Adsense, Amazon, etc can ultimately get me my $15 grand/year that I’m shooting for, but like I said I’m looking 10 years down the road & long haul not get rich quick scheme. ultimately I’ll probably sell my own inventory - I have the contacts - and even assuming that my competitor’s ad rate cards are over-inflated I think it’ll eventually pay off, and if it doesn’t, hey I tried.

Anyway, back to the topic: then am I to assume that this formulas are in fact correct for caculating CPM revenue:

CPM rate x page views x number of ads/page = CPM revenue

How about a formula for estimating adsense revenue?

pageviews x click-thru rate x revenue-per-click=adsense revenue

I guess a problem here is that the last two variables aren’t easy to guess. Adsense click thru rate can’t be guestimated accurately thanks to Google’s opacity and the differences in web sites, but I think a good guess can be made for revenue-per-click based on what it charges for keywords minus google’s cut of 60-70%(?)

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Yeah I meant “effective” CPM rate for combination of a variety of revenue streams (banners, amazon, comparative shopping, etc)

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It’s more like 6000

You’re right. I dropped a zero.

I need more coffee before I try to type numbers in the future :slight_smile:

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CPM rate x page views x number of ads/page = CPM revenue

To calculate CPM:

Revenue/(Ad impressions/1000)=CPM

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"IBD: How does paid search compare with banner ads?

Schepke: Typical banner conversion rates – the percentage of people who click on the banner ad who actually fill out a request-for-info or registration form on the site – are between 1% and 3%. But with pay-for-performance with Google and Overture, we average 13%. "

SOURCE: Investor’s Business Daily, Nov 24, 2003 pA04
TITLE: Getting Best Keywords Are Key To E-Commerce Success

The article is an interview with a campaign manager for a brick-and-mortar dating service.

I suspect that the click thru of Adsense ads will be generally less than the click thru rate of paid search results, of course (for all sorts of reasons, ie: searcher is more motivated to click, Adsense ads don’t rotate enough for repreat viewers…)

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