How are the Prices of Web/Online Advertising Calculated?
Posted on 23/01/2008 in Internet Marketing

One of my students was thinking about adding online/web advertising to his website and asked for some info about how rates for online/web advertising is calculated. I thought it might be useful to post my answer on the WebCare blog:

Web advertising is a bit different to display advertising – but I suppose the principles are similar.

The main cost driver is not size, but no of impressions (ie how many times the ad is viewed) – so how much traffic is each page on your site getting?  Until you are getting reasonable traffic levels, advertising is not really worth much (because very few people are seeing it).

The other driver is click through rate (CTR – how many people actually click on the ad to go through to the advertiser’s site?).

You can sell ads by:

  • no of impressions
  • CTR
  • size
  • location (top rather than bottom)
  • sub-pages
  • time
  • etc

I was talking with a client yesterday who told me they looked at advertising on one big niche market site – start price is $20k!!!  So – they are advertising with the competitor of that big niche market!  But, they are not advertising on their site – but in the emails that get sent out to people on their mail list – and that is costing $900 per email just to people in one state!!  It is massive traffic that is driving these prices.

To my mind impressions and CTR are a much better measure than time – as you could buy a months worth of advertising that only gets 50 impressions and 0 CTR’s!!  CTR is better than impressions (which is why google adwords works so well) as you are paying for actual traffic rather than potential traffic! So, if you can guarantee advertisers on your site a certain level of traffic to their site (which is what CTR measures) then I think you are offering a much better deal than just impressions.


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