How to price banner advertising on your website
Posted March 10, 2009 – 6:15 pm
If you are a smaller content publisher, setting the prices for banner ads, text links, and other types of online advertising for your websites can be challenging.
Over time, you will eventually converge on the right pricing based on what your advertisers say and what prices seem to move the most inventory. But in the early days when you first introduce paid advertising to your website, it can seem pretty much like a shot in the dark – even if your site has been around for a while and has some decent traffic sell against.
In fact, ad pricing is as much art as science, especially for smaller publishers who offer access to specialty niches and audiences. To some degree, the right price is whatever price you can get away with charging. However, it is probably best to apply a bit of rigor to the process so you can defend your pricing against hardnosed ad buyers from agencies or advertisers.
To figure out what your online ad prices should be, you should visit a site like Federated Media and go through the process of planning an advertising campaign. Federated Media is a well known and fairly exclusive advertising network that’s popular with the digerati in Silicon Valley and elsewhere. It inclues some very popular sites such as TechCrunch and Mashable, but also plenty of lesser known sites as well.
Obviously, the campaign you build is pure make believe, but if you walk through their campaign planning tool, it’ll give you access to the quoted pricing of 100+ popular websites from a variety of content categories and niche markets.
Online Ad Pricing Example
You can use the pricing data from these sites to help you outline reasonable (and defensible) pricing for your site. Of course, if you have access to pricing data from sites that are direct competitors of yours, then by all means, use that, too.
Create a Sensible Ad Pricing Structure
The first step is to outline the structure of your ad pricing scheme. By ‘structure’ I mean the type of ads and ad inventory you have available to sell.
The example at right from Federated shows a website which has a slightly complicated pricing structure. You’ll notice that they have 3 types of pricing ‘buckets’ for different types of ads:
- Text ads – priced by week
- Flat rate graphical ads – priced by week for smaller graphical ads
- CPM ads – priced on a cost per thousand (or CPM) basis for larger graphical ads (aka display ads)
While not all publishers have 3 categories of pricing like this, it is certainly not uncommon or unreasonable. If you are just starting out, you may want to opt for simplicity first – at least until you get things a bit more organized. You can always add new ad units later.
Within this pricing plan, you’ll also notice that ad pricing varies in terms of:
- Ad size – larger ads cost more than smaller ads
- Positioning – ads with more desirable ‘premium’ placement on the page cost more
Again, this is common and to be expected, but don’t get too carried away with too many ad sizes or too many positioning options. A few choices is good, but too many will confuse both you and your ad buyers, especially if you don’t have a lot of traffic to work with and/or you aren’t using a sophisticated ad management tool.
Determine the Actual Ad Prices
Once you have an idea of the advertising inventory you have available to sell, then you need to set the actual prices you are going to charge for those ad slots – and whether you are going to be charging for them on a time-based or CPM-based basis.
To do this, you need to know a couple more things beyond the raw inventory units :
- Site demographics. You need to know who visits your site – male/female, older/younger, richer/poorer, etc. – and you need to use that information to help you either push prices up (if you are reaching a highly desirable demographic) or push your prices down (if you reach a less desirable demographic).
- Competition. You need to know what other options your advertisers have for reaching your demographic. If they have a lot of options, then that will tend to lower your prices; if they have few options for reaching your audience, then you can charge more.
- Site traffic. You need to know how much traffic your site is receiving – ideally measured in several ways. You at least need to know total monthly page views, but it may also help to know total visitors, traffic sources, bounce rate, average time on site, average pages viewed per visit, etc. These stats will help you figure pricing for anything where you set a fixed price per period (like in the example above where they price 125×125 button ads by the week). They may also help you understand how engaged your visitors are – if your site has a relatively small number of highly engaged visitors who come back again and again vs. a larger number of visitors who just come once. Advertisers may find an engaged audience more attractive than a less engaged one (or vice versa, depending on the situation).
One point here is that if you have decent traffic, but not a huge amount, then you may want to price most of your advertising on a time-based basis – per week, per month, etc. This will afford you some flexibilty to round up and otherwise keep you out of trouble in the event your site traffic dips from time to time. It’s also possibly easier to manage and sell, at least to certain kinds of ad buyers.
Consider How You Will Manage Your Advertising
Another factor to consider that may impact either your ad pricing, or your available inventory, or both is the mechanism you have on hand to manage your ad inventory. In other words, by what process will you be serving ads to your website and how flexible is that to accomodate various pricing mechanisms.
For instance, if you are placing the ads on your site by hand, then you will probably want to set your pricing by units of time vs. CPM. That’s because it’ll be a lot easier to determine that Advertiser X needs to go up on Monday morning and come off the site 4 Mondays later than it will be to guesstimate the moment when they’ve hit their 30,000th ad impression.
If you are placing ads using an automated ad manager like OpenX or Google Ad Manager, then you have a lot more flexibility. You can do CPM-based placements just as easily as time-based ones. You can also easily switch ad copy out in the middle of a run if an advertiser changes their mind (as they often do).
It turns out that managing a bunch of ad slots and advertisers can get confusing and time consuming fairly quickly. In general, I’d advise going with as simple an approach as possible until you get yourself fully equipped to manage your ad program. Once you have all the pieces in place and working well, then you can get more creative and ambitious with your advertising program.
6 Comments
I get to this post through a link on LinkedIn Answers. I found it really useful and interesting! Congrats on it!
You are most welcome. I’m glad it was useful to you.
Many thanks for this post! It’s nice to come upon some decent information after sifting through garbage and nonsense for hours.
Excellent job!
(I also found this on LinkedIn Answers)
I am soon launching a web can i get ads monthing fixed rate(not per click)ads display on my web for one week or one month or above.
Yes, certainly, you should be able to set up ads (text ads or display ads) to run for any length of time you specify.
It depends on the ad manager software you are using and whether or not it supports this functionality. Any decent ad management platform will. Free platforms like OpenX (which I use) or Google Ad Manager definitely allow this.
That said, many web technology platforms (e.g., WordPress or Drupal) don’t come with built in ad managers, so you need to add that functionality via plug-ins or separate programs like OpenX.
I suggest you look into the ad management features for the web technology you are using to determine what functionality it has. If the functionality isn’t enough to do what you want, you should look into either OpenX or Google Ad Manager which can be used in conjunction with most web publishing platforms.
This was most definitely helpful. Broaden my ideas of how to charge.
Thanks