How much should you charge to advertise on your site?

If you're trying to figure out how much you should charge to advertise on your site, it's actually pretty simple:

First, take the going rate of meat. Multiply that by the cost of fuel, and then, finally, divide by the number of people.

Easy, right?

Maybe not!

Wow, that was a lot of sarcasm, even for me... I apologize... That may or may not have been more sarcasm. It's hard for even me to tell sometimes.

So, as you may have suspected (or, entirely possibly, you may not have) I've been asked recently, several times, how much a site should charge for its advertising space. I've heard this question posed (well, it was related to me by a colleague) by someone who works at a radio station trying to get their site to start, you know, not losing them money anymore, and by a friend who had to do a business plan for school.

In both cases, the question, essentially, was,

"How much should we charge?"

That's, first of all, the wrong question you should be asking yourself, and advertisers. The first question you should ask yourself is, "How much would somebody actually pay for this?" Which, of course, leads you to start thinking about value, the value of the space and the value of the audience who will see it.

Like meat, fuel, and other incredibly general terms that describe so much and nothing, advertisements are not created equal, and do not have equal value. A big box on one sports website and a big box on another sports website absolutely do not necessarily command the same price.

So what's the difference?

Are we talking bacon, or prime rib steak?* There is no "market value" for meat. There's no market value for ads. Each is assessed on an individual basis depending on quality and demand. A terrible ad space on a website with an incredibly important and high-spending audience demands a higher price than great space on a website no one goes to, obviously.

You may have noticed something.

I've written a lot of words without telling you how much to charge for your ad space.

You're right. Give me more information about your site and then we'll talk.

For now, you've asked me how much food costs, and I've said, "Money."


*Wow, for a vegan I'm strangely drawn to analogies about dead animals.

Have great reps!

Most of the time my decision to buy on a site is based on these criteria, in this order:

1) Will it hit my demo?
2) Do I trust the rep?
3) Price.

That’s right, my relationship with my rep is usually more important than the price. A good rep saves you time, and comes up with ideas that create greater value. That can effectively make it cheaper to buy on a more expensive site with a great rep. A site with a low CPM and a rep who’s only interested in getting the contract signed and who seems to disappear once it is can cost you more time, and therefore more money, in the long run.

This is of course not unique to web advertising, but nobody seems to stay put for very long in in this industry, since it's so young. So if you’re selling ads online and use sales reps and account managers, try to keep them where they are! I tend to banter with my reps (well, I fill their inboxes with long-winded questions peppered with attempts at humour), and the better the rep is at addressing my concerns quickly, and exceeding my expectations of service and trust, the more likely I am to buy on the site.

If you have to charge more so that you can afford to pay your staff well and keep them around, that should be okay. I’ll still buy because I know I’m getting a much greater value in the long run.

Oh, and they should humour me when I try to be funny. That’s crucial, too!

Traffic Ain’t Everything

In fact, it's almost nothing.

“How much traffic does your site get?” This is a question commercial websites get asked a lot.

And it makes sense, right? If you’re paying to put an ad on a website, you want as many people as possible to see it, so you’d want to make sure that lots of people visit the site.

Well, that’s just not how it works.

See, most of these sites sell on a CPM basis. This means that you’re only paying when someone sees your ad. So if you buy 10,000 impressions (or 10,000 instances of someone seeing the ad), then it often makes little difference how much traffic the site gets.

If you’re considering purchasing ad space online, “traffic” is simply not a thing to worry about in most cases. Reach might be. %Composition UV should be. But traffic? Not so much.

If it is a crucial part of your decision-making process, you’re thinking about the wrong things. You’re thinking that you’re buying space in a newspaper, or on a TV show. You’re thinking about Gross Rating Points. You’re not thinking that you’re advertising on the internet.

Internet advertising allows you to measure every single time someone sees an ad, every single time someone clicks an ad. You can see where they’re from (down to the postal/zip code), you can see what browser they’re using, whether they’re on dial-up or broadband, and so many more things. And many sites offer all of these things and more as targeting options. This is not TV, this is not radio.

Traffic isn’t a thing, people. Hitting your target demo precisely, and only paying when you do -- that’s a thing. That’s the thing that matters.

Slashdot has a ton of traffic, but if you’re selling nail polish*, that just doesn’t make a difference.



*Sorry to whip out the No Girls on Slashdot cliché, but you get my point.

Sell by the CPM

Seriously, don't try to get me to buy ad space on your website based on time. I'm just going to assume you're trying to trick me into paying more than the space is worth.

Internet advertising is measurable and trackable, so I'm going to buy based on measurable and trackable amounts. I'm going to buy based on how many impressions the ad actually receives. So if you insist on selling by the month or week, I'm still going to work out the effective CPM (cost per thousand impressions) and decide from there if it's a good deal. And I'm never going to buy space on a site that can't give me real data on how many impressions the ad is likely to receive. So save us both that trouble and sell on a CPM basis from the get-go.

Now, I understand that it might be a little more complicated for you. Because how do you decide how valuable those thousand impressions are?

Well, first consider supply and demand. If you have huge inventory, you don't want to risk it going to waste and not having enough advertisers buying, or enough impressions being purchased. So you'll want to set a CPM that gets most or all of your impressions purchased.

If you don't get a lot of traffic, you'd better have a great reason why those limited eyeballs are really valuable. Define a niche for your site that makes that small number of impressions worth buying. If you can justify it, you might even be able to set a reasonably high CPM. If you're selling out your inventory, then you're doing okay (if you're selling out your inventory really, really quickly, maybe you should up your CPM).

If you're in the mid-range, with lots of impressions but not more than you know what to do with, you don't necessarily need a mid-range CPM. Again, if you can justify why those impressions are more valuable than the next guy's (if you have a niche website, or serve a need that no one else is covering), then you don't have to charge a middle of the road price.

So if you're selling ad space on your website, those are a few things to keep in mind. And remember, the best thing you can do to get yourself on one of my buys is this: Make it painless. If I can call you up or fire you off an email and expect great service and great ROI, and provide a great experience for myself and my client, then you've got the best shot at getting on a buy.

At the end of the day it's about value for my client, and since they're getting billed based on how much time I spend on a buy, too, if buying on your website gets me valuable impressions without having to spend a lot of time on it, you're doing us all a favor.