Many Internet companies have based their business model solely on advertising revenue, and most have failed. Perhaps it’s because Internet advertising is still in its infancy, perhaps it’s because current advertising models don’t work. Either way I’m here to give you a quick rundown of the basics of selling advertising and how you can generate some additional revenue by selling advertising space on your site.
First you’ll need to know some basic Advertising Industry Definitions:
CPM – Cost per thousand impressions (banner ad views)
CPC – Cost per Clickthrough (every time someone clicks on the banner)
CPA – Cost per Action (sign ups, filled out forms, purchases, clicks)
ROI – Return on Investment
How to start generating additional revenue now:
One easy way to start earning extra money right away is to join an Ad network, though lately many have begun rejecting sites simply because of the enormous glut of inventory that they already have. Nevertheless my recommendation is that you try to join several banner networks such as: Adflight, Adtegrity, Advertising.com, BurstMedia, Engage, FastClick, Sonar, ValueClick and Websitesponsors and divide your ad inventory between those that accept you. If you carefully monitor the results from each ad network over a period of one to three months you’ll be able to maximize your revenue opportunities by dropping the weakest performing networks from your site.
Another way to generate additional revenue from your website is to try various affiliate programs, both AssociatePrograms and ClickQuick have a thorough list. I recommend that you experiment selling products and services that fit the profile of your site’s audience and calculate how much money you’re making per 1000 ad views. Be aware that many affiliate programs are very poor, and will make you very little money. You’ll have to hunt around quite a bit to find one that pays well. My recommendation is that you don’t run banner ads to promote these affiliate programs, but rather use text links and newsletter ads. Use your Banner ad space for ad networks.
Two other options of generating revenue have caught on recently. Number one is search box programs in which you put a form on your site and get paid on a per-search basis. Search123, SearchTraffic and SearchReferral are all popular and well respected. You can expect to make 3 to 10 cents per search generated through your site.
The other method of generating revenue, cost-per-action (CPA), is best accomplished by joining networks like OnResponse, or CyberBounty which will compensate you everytime one of your visitors downloads a piece of software, registers for a contest or something similar. Many people have had great success with these CPA Networks, especially freebie oriented sites.
Your last option is to hire an advertising sales representative. This option is not viable for smaller sites (less then 1,000,000 page views/month) as many of these rep firms won’t even look in your direction unless you have lots of traffic. Some also charge a sign-up fee of several thousand dollars. The problem with taking this route is that these companies charge huge commission fees (in the area of 30 to 50%). The upside to all of this is that you have one less thing on your to do list, and you can concentrate on creating content for your site and building traffic levels.
Doing it Yourself for the long-term
Ultimately, the only way to generate significant revenue through advertising is to do it yourself.
Don’t even consider selling advertising by yourself unless you get at least 10,000 unique visitors per month. The more traffic you have, the greater the chance that you will be able to sell advertising by yourself. The majority of advertising dollars go to the Top 25 sites, and as you can imagine there is a battle going on for every last advertising dollar among tens of thousands of other sites. Make sure you have good statistics about the visitors on your site; a log file analysis package like WebTrends will help you with this.
Still with me? Ok, let’s move on. In order to do this you will need to:
- Install your own ad serving solution
- Choose ad sizes that you’ll be using around your site
- Price your Inventory
- Create a media kit/advertising information pages
- Sell newsletter advertising
- Know what to do with unsold advertising space
Install your own ad serving solution:
Before you do anything else, you will need to install ad management software on your site in order to rotate banners around your site and provide advertisers with an account where they can track clickthroughs and impressions. Below I have included a quick run down of several of the most popular ad management systems out there for small to medium sized sites:
AdCycle is a PERL & mySQL based ad serving solution which had almost every feature you could ask for, at an extremely competetive $89 price-point. AdCycle’s extensive feature set includes impression and clickthrough capping, rich media support, campaign priority control, campaign grouping, and timed delivery which allows you to distribute a certain number of impressions over a period of time.
This set of Perl scripts ($50) is what I started out with when I originally started selling advertising. It provides all of the basic statistics to you and your advertisers, and the latest version even predicts when an ad campaign will finish running.
The big problem with WebAdverts is the enormous amount of server resources it uses — which means it isn’t suitable for any sites that get more then 100,000 pageviews per month unless they are hosted on a dedicated server. Many webhosting companies (including Hiway which hosts over 100,000 sites) have banned WebAdverts as it causes too many problems for them.
If you decide to use this relatively low-end solution, be prepared to spend a couple of hours trying to get it working properly unless you’re very familiar with CGI scripts. Don’t get the wrong idea — WebAdverts works really well for smaller sites. Just plan on upgrading to a more efficient ad tracking system as your traffic increases.
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This program comes in two flavors, a Perl version and a ‘C’ version. Like WebAdverts, the Perl version is not recommended because it will use a lot of server resources. If you’re going to use this program then definitely go for the ‘C’ version.
This program provides more features than WebAdverts as you can do things like target banners by day and time, show banners when specific keywords are used on your site, and domains (.edu .net .uk etc.). It also keeps detailed stats about each ad displayed including date and time, browser used, domain extension and whether a click-thru occurred. AdGenie costs $345 for the ‘C’ version which is the one you’d want.
This program is very efficient because it’s written in C/C++ and can therefore handle many more ad requests per day than WebAdverts which is written entirely in Perl. CentralAd 4.0 which costs $595 provides Rich Media/HTML support, full campaign scheduling and extensive reporting. However, the program lacks some of the more advanced features found in third-party ad serving solutions such as ad frequency capping and targeting by things such as country of origin or operating system being used.
This is the 2nd most expensive ad management system on the list — costing between $795 and $1995 — but it’s also the most professional and versatile of the bunch. For example, you can distribute ad banners over a period of time, statistical reports can be emailed to your advertisers, access logs for each banner are kept, and you can have multiple banners of the same size on one page without having the same ad being displayed twice and much more.
AdJuggler is also available as a hosted solution (meaning it’s installing on their servers) and in an enterprise version. You can view a comparison of the different versions at www.thruport.com/adjuggler.
This is the solution that we used at SitePoint for a long time. It provides features (such as automatic emailing of stats to advertisers, country targetting etc.) very similar to AdJuggler albeit at a higher price, $149 per month for serving of up to 25,000 impressions per day. Only part of the program is installed on your server, the rest lies on Spinbox.com from which all of your banners are loaded from.
We decided to migrate away from Spinbox due to major reliability and speed problems that they began having. Things may have changed since then.
AdRunner is an outsourced solution run by MyComputer that we are currently using at SitePoint. Over the 8 months that we’ve been using them, SitePoint has nothing but praise for the ad management system and the people behind it. Speed, reliability, features and support are all fabulous.
AdRunner is priced on a CPM basis (per 1000 ads served) and can handle sites of nearly any size. The targeting capabilities of AdRunner are mind boggling. For example, if you wanted to, you can target a banner to be only served on Monday between 3 and 4PM to Windows 95 users running Netscape 3 at a resolution of 800×600 with the Flash plugin, cookies enabled, visiting from Nepal by following a link from Yahoo.
Update: AdRunner is no longer accepting new clients, and it looks like they may bite the dust.
At $450 the price of AdvertPro is competetive with CentralAd 4.0. AdvertPro features support for rich media, distribution of ads over a set amount of time, and solid reporting features. Targeting is limited to hours of the day, operating system and browser. AdvertPro is written in PERL with a SQL database and therefore may have problems on really high traffic sites (several million ad impressions a month) but should more than suffice for everybody else.
You’ll find several other programs listed at CGI- Resources.com
Choose ad sizes that you’ll be using around your site
Currently accepted standard ad sizes are:
- 468 X 60 Pixels (Full Banner)
- 120 x 90 Pixels (Button 1)
- 120 x 60 Pixels (Button 2)
- 125 x 125 Pixels(Square Button)
- 125 x 400 (Tower or Skyscraper)
- 88 x 31 Pixels (Micro Button)
You will often find variations of the tower ad. It’s up to you to research what the large sites are using, and which one fits into the format of your site.
The list above is by no means conclusive. For example, CNET has also recently implemented a 360×300 square ad that sits right within the content of the page. You can often see this ad by browsing around News.com
Price your Inventory
So how much should you charge for advertising space on your site?
Here is a checklist to help you evaluate this.
Tip: You should price your inventory on a CPM basis and not on a CPC basis.
1.) How unique is your audience, how many other sites are there that advertisers can use to reach the same audience?
2.) Performance of advertising on your site in the past (exchanging banners with other sites, banner networks, and affiliate programs can be used to measure this).
3.) What banner rotation system do you use? Do you have a simple set of CGI Scripts, or a 10,000 dollar system that automatically profiles your visitors, allows targeting by domain, keyword searches, browsers, operating systems etc.
4.) How high profile is your site? Are you in the news a lot? This can help you increase your CPM rates as advertisers may want to be associated with a site that’s frequently mentioned in the media.
5.) Lastly don’t forget to take a look at the rate cards of your competitors if you can. It always helps to under-cut their price (to a reasonable extent).
6.) Do you have a domain name? If you don’t you can automatically forgo even the thought of selling advertising alone. A banner network or affiliate program is the only way to go if your site is hosted on free webspace.
7.) Your audience. Is your site reaching CEOs of Fortune 500 companies, or 15 year old kids looking for video games? Is your site reaching computer professionals or newbies? Is your site getting visited by freebie seekers or people who regularly purchase over the internet? Conduct a survey to find out.
8.) Have a sliding scale of pricing according to the amount of ad space purchased. For example offer $30 CPM for advertisers buying less then 50,000 impressions, $25 CPM for advertisers buying 50,000 to 100,000 impressions, and $20 CPM to advertisers buying 100,000+ impressions.
9.) Banner sizes. Of course the bigger the banner the more it will cost. 468 x 60 Banner ad space will be several times more expensive then 88 x 31 micro-buttons.
10.) Number of ads per page. Do you have one 468 x 60 Banner per page on your site? Or do you have one 468 x 60, two 120 x 90 and four 88 x 31 buttons? The more ads a page has the lower the clickthrough rates for each individual advertiser will be.
11.) Has your site been audited (see below)?
Some larger advertisers will demand that your site be audited by a company like I/Pro before they give you a single penny. This company provides auditing of newsletter subscription numbers as well as website traffic. Having your site audited is a great excuse for raising your ad rates and will definitely give you the edge over your competition.
Create a Media Kit
Make sure you put out an "advertising for sale" sign on your site, this means a media kit. A Media Kit includes information about your rates, your traffic, various forms of advertising and sponsorships available, banner specifications, and demographics.
Conducting a survey of your audience is very helpful as it tells a potential advertiser a little bit about the people who visit your site, and the people their advertising dollars are going to be reaching.
Take a look at the media kits of major sites to see how they’ve laid theirs out and what information they provide. Of course, you’re always free to see how we’ve done ours here at SitePoint: www.sitepoint.com/mediakit/.
Selling Newsletter Advertising
Another way to generate revenue for your site is to sell advertising in your newsletter/e-zine. Once you pass the 1000 subscriber mark you can start publicizing (on your site and in the newsletter itself) that ad space is available. Advertisements in newsletters are usually much more expensive than standard banner ads, although this depends on how many ads you have in your newsletter. You’ll have to make a few important decisions before you start selling advertising:
1.) Size restrictions for the ads. How many lines can the ad be? How many characters per line?
2.) Will you have 1-2 ads per newsletter, or a whole bunch of dirt cheap classified ads?
3.) How much will you charge for advertising? A good rule of thumb is that on a CPM basis all the advertising in the newsletter will bring in twice as much money than a standard 468 x 60 Banner on your site. For example, if you sell 468 x 60 banner ads on your site at $20 CPM then you should be making $40 CPM from your newsletter. You could get that $40 CPM by having one ad in your newsletter for $40 CPM, two ads at $20 CPM, four ads at $10 CPM etc.
What to do with unsold advertising space
1.) Trade it with sites that complement yours. This is a great way to increase traffic to your site.
2.) Fill it with self promotional ads, advertising specific sections of your site to which you want to draw more traffic to.
3.) Run a banner advertising the fact that advertising space is available on your site.
4.) Bonus the space to advertisers at no extra cost. Not only will they be happy to receive the extra exposure around your network, but they will also be much more likely to renew their advertising campaign in the future.
Some Final Words
Think like a Business person. Selling advertising is just like selling any other product or service and standard sales and marketing techniques apply.
More Information and Resources:
Ad Resource – Lots of information about ad rates and the like.
Online Advertising Discussion List – This great daily discussion list is an invaluable source of information about the online advertising industry.
Internet Advertising Discussion List – A great place to learn more about selling advertising, Rich Media, 3rd Party Ad Serving and more.
ClickZ – Media Selling – I highly recommend that you read all past archives to this column and subscribe to receive it via email. It’s an invaluable resource.
ClickZ – Profitable Online Publishing – The name says it all. Read every last article that’s archived and subscribe to receive future columns via email.
Matt is the co-founder of SitePoint, 99designs and Flippa. He lives in Vancouver, Canada.
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