How Do You Price Advertising?
Calculating how much do you charge for advertising is the result of a combination of factors you should consider. You should determine a rate that helps meet your monetization goals and at the same time attract high-paying advertisers to your niche. Here is what you should take into account step by step.
1. Define Your Minimum Rate
How much do you need to charge to make a profit? The first step should be defining what’s your minimum rate. Analyze your costs and what is the annual profit from advertising you need to make. Let’s say your business expenses will be $100,000 this year, and you have projected to make $30,000 from sales and other non-advertising income sources. You’ll need to make $70,000 from selling advertising space.
2. Project Sales
Projecting how much you might sell from ads can help to get a better idea of how much you should charge. Try to calculate how many ad units you might sell from your site. Calculate how much available space for ads you have on your website.
A good starting point is to look at the ad placement and format. How many ads you can fit on your page without it being cluttered? What is their size and position on the page? Keep in mind to calculate how much of the ad space you will sell through a pay-per-click program and how much you will sell yourself.
3. Look At Your Competitors
Take a look at what your competitors are charging for advertising. Similar websites that attract the same audience are the obvious choice. Your audience can also give you insights. Check where your target clients are advertising, list the prices per ad size, placement, and frequency.
4. Calculate Your CPM
CPM is the cost to reach a thousand views of an ad. As a publisher, you should calculate how much will cost for an advertiser to run an ad a thousand times on your site. Compare your CPM with those of your competitors to see if your need to adjust your rates.
5. Set the Ad Rate
Once you know your profit needs, your competition, and how much is your target audience you can set your own rates. Remember to include any discounts or promotions you will offer.
What Influences Your Website Ad Rates?
Before getting into pricing models, we should understand that there are features that impact how much can you charge for adverts on your site. Consider that ad rates can vary greatly, from $0.01 to $10 per click.
What makes a website ad-worthy? Well, there are benchmarks your site needs to meet in order to start selling ad space. Each ad network and platform has different requirements for publishers.
The golden rule is that the more value your ad placements bring to advertisers, the more they’ll pay.
Traffic and reach are two of the most important factors to consider regarding how valuable can be advertising on your site. Here is a list of the most common:
Advertising on your site must make sense for potential clients. That means, they need to see ROI from advertising on your website. The amount you can charge for ads will also depend on your niche. The bidding rate varies greatly according to the industry.
The highest-paid niches are usually legal, finance, and insurance sites. Review and comparison websites are also among the ones with top advertising rates.
This is the characteristic ad networks look at first to evaluate a website for its advertising value. The more visits your site has, the more people see the ads placed on it, generating more leads and conversions for the advertiser.
Know your traffic and performance metrics. Check not only the number of visitors but also the number of page views. Track your site’s performance changes to identify hot spots where the activity peaks. But the most important traffic metric you should look for is monthly traffic, how many visitors view the site per month.
Remember that some pages on your website attract more visitors than others. So, a page may make a different number of impressions (thus, money) than another. If a page can contain 4 ads, will make more impressions per page view than another that can only have one ad. Take into account that too many ads can disturb the user experience.
Ad networks and platforms usually have traffic minimums you need to meet in order to qualify for advertising. Once you reach the required number of visitors per month, you can monetize through an ad network, monetization platform, affiliate marketing, or other options. How many visitors should you have? This will depend on your niche and audience. Some will need hundreds of unique daily visitors, and for other companies, the number needs to be close to several thousand.
Potential advertisers want to reach their target audience and expand their reach. So, if the amount of traffic on your website is too low, you should first grow your numbers to become attractive to advertisers.
The quality of the content on your website is the other big factor that influences your rates. Attracting visitors requires publishing quality content consistently. The content should be varied, relevant, and provide value to the user. The more your content is specific to your target, the more value the visitors can get from it, and the more valuable is your website.
Specific topics also increase your site ranking. If your users can find the answer to a specific question on your website, search engine algorithms will rank your site higher. You also have chances of getting a coveted featured snippet. The more unique your content, the more value you provide to users and potential advertisers.
When creating content for your website, consider the buyer journey. Create content that addresses the awareness, consideration, and decision stages. There are certain types of content that are more attractive to advertisers because they have high conversion rates. An example of that is a comparison or review site.
Your site performance is key for generating a good user experience. There are on-page factors that can affect negatively your site performance. Start by having a clean design and easy navigation. Take care of potential latency problems by ensuring your site and images load quickly. Finally, make sure the site responds to mobile devices.
Knowing about your audience is critical for a successful website. Pay attention to your audience demographics, interests, and behavior. Factors like age, location, gender, economic activity, or income can give you insights about who are your users and which type of advertisers you may attract. The more information you have about your audience, the better you can target it.
If your site targets your advertisers’ typical clients, chances are that your site will become attractive for companies. After all, your site is where their potential clients hang out or go for
There are a few ways you can charge per advertising. The pricing model will depend on your type of website and audience. Does your site provide a lot of exposure? Review and informational sites are included in this category. Maybe your site encourages conversions? Examples of this are e-commerce sites.
Here are the most common pricing models:
CPM – Cost per Mille
You can charge the advertiser per impression. Every time a visitor views the ad, it counts as an impression and it adds to the total bill to the advertiser.
A more popular and simpler way is to charge per thousand impressions. Cost per Mille stands for cost per a thousand impressions. It means how much do you charge advertisers every thousand times an ad gets viewed.
How do you calculate CPM?
|Cost per Mille = (Total ad spend) * 100
Total ad impressions
CPC – Cost per Click
In this model, the advertiser pays you every time a visitor clicks on their ad. This is a popular method of pricing since it is less risky for advertisers. Depending on the rate, it can be profitable for you as a publisher. The downside of this method is that it is unpredictable since you don’t know how many people will click on the ad.
How do you calculate CPC?
|Cost per Click = (Total ad spend)
Total measured clicks
CPA – Cost per Action
This option involves charging advertisers a fee for each specific type of action, like leads or sales. Also called Cost per Acquisition, this method offers a higher reassurance to advertisers because they pay for more concrete results. In this model, you place the ad on your website and get paid only when someone clicks on it and completes the conversion on the advertiser’s website.
The conversion can be registering for an event, purchasing a product, or filling up a form. Usually, publishers get paid a percentage on each conversion that can range from 20% and up. Therefore CPA can be very profitable for publishers. The downside is that you depend on the advertiser making the conversions to get paid.
How do you calculate CPA?
|Cost per Acquisition = (Total amount spend)
Total Attributed Conversions
You can also charge a flat rate to advertisers, for instance, charge a monthly amount. This model can be very predictable since you charge a fixed fee regardless of how the ad performs. However, this pricing model can be risky for advertisers so they may look more into your website performance.
What Are the Most Popular Ad Formats
Besides choosing a pricing model, you should understand what type of ads are you going to place on your website. Tip: Mix different types of ads. Here are the most popular ads formats:
These are the most popular ads, and you usually see them on top of pages but they can be on almost any place on a page. There can be different sizes too.
There are also vertical banners, called skyscrapers
Banners can also be square, like the ones you see on the side of a webpage.
Video ads are becoming more popular every day. According to a report from eMarketer, marketers will dedicate 28.8% of their budgets to digital video ads by 2024 from 24.9% in 2019.
Video ads engage and keep the attention of viewers, increasing the time-on-page. However, when videos are too big, they can cause the page to load slower, disrupting the user experience.
Native ads are adverts that blend with the page. They are also called contextual ads since they integrate with the text, being similar to the site content. These types of adverts don’t disrupt the user experience but enhance it, by providing value to users.
There are three main types of native advertising:
- In feed/In content – The ads are integrated into the content pieces or social feeds, trying to blend with the original content.
- Content recommendation ads – Usually displayed alongside editorial content, typically at the end of an article, they feature recommended ads or content.
- Native content ads – Also called branded ads, they display unique content on a publisher’s website.
Interactive ads encourage viewers’ participation. Interactive advertising can appear in social media, videos, web banners, or display windows. Examples of interactive advertising can be an interactive display, a gamified ad, a contest, or a poll.
Keep These Metrics on Track to Attract High Paying Advertisers
Placing ads on your site is not very useful if they aren’t easily visible. Ad viewability refers to how visible ads are on a website. An ad is considered visible when at least 50% of it shows on the screen for more than one second. This is the standard for measuring an impression.
Ads can lose viewability for several reasons:
- The site has ad blockers
- The site is getting bot traffic
- Poor ad placement
- The page takes too long to load
- The ad is below the fold
Also, the position, size, and layout of the ad also can prevent visitors from viewing the ads.
How do you measure viewability?
Active views are the percentage of the ad’s total impressions that are viewable.
Viewable % = (Viewable Impressions) x 100
Reach is the number of people that are exposed to an ad during a specific time period. There is a difference between impressions and reach. Impressions measure the times a user saw your ad or content. The reach measures the number of unique people that see your ad.
CTR – Click-Through-Rate
This metric measures the number of clicks the ad receives divided by the times the ad is shown.
How do you measure click-through rate?
CTR = Total number of clicks
For example, if you have 100 clicks on 2000 impressions, then your CTR should be 5%.
This metric is calculated by dividing the total number of conversions by the number of interactions in the same time period.
For instance, if you had 60 conversions from 1000 interactions, your conversion rate would be 6%.
Conversion rate = total number of conversions
Total number of interactions
How Much Should I Charge for Advertising on My Website?
If you want to know how to calculate how to charge for advertising on your website here are some steps:
1. Determine where are your page hot spots
Use a heatmap to understand where are your visitors looking when they are on your site. Identify the best-performing pages. Using this information, determine the ideal ad placement for your pages.
2. Find what is normal to your industry
As we explained above, the rate of ads can vary greatly for different industries. Check your industry benchmarks to know how much is the CTC/CPC. Then compare the rates on your niche. Some niches pay better than others.
3. Consider your website metrics
Check your CTR on your website. The revenue you’ll get from advertising will depend in great part on how many people click on the ads. Pageviews, CTR, Number of Clicks, and Cost per Conversion, affect the total revenue you can get from advertising. Considering that the average CTR for ads on Google display is $0.58, let’s see an example in the table below:
How much can you earn according to your metrics?
Case 1: Low CTR and low number of clicks
|Pageviews per month||CTR %||Number of Clicks||CPC ($)||Earnings ($)|
Case 2: High CTR and number of clicks
|Pageviews per month||CTR %||Number of Clicks||CPC ($)||Earnings ($)|
Here you can see that for the same number of page views when the number of times an ad gets clicked grows, the earning grows.
4. Test by Yourself How Much an Ad on Your Site Is Worth
Now is the time to check whether your online advertising strategy is correct. Once you know your metrics, your audience, defined your rates and type of ads, test your ideas. Start by adding a few advertisers and check the ad performance. This will help you get a more accurate picture of how much an ad on your site is worth to advertisers.
The Average Cost of Website Advertising
As we mentioned above, some niches pay better than others for online advertising. Thus, if your site happens to be in the lucky industries, you have more chances of higher revenue.
|Top 5 industries with the highest CPC ($)|
|Dating and personals||1.49|
|Finance and Insurance||0.86|
Also, some countries are more profitable for publishers than others.
|Top 5 countries with the highest CPC rates|
Tips to Price Advertising on Your Website
- Not all visitors are the same. How much value a visitor is as a lead for your advertiser can influence your rates and pricing. If your site is geared to people buying cars, these potential customers are worth top dollars for your advertisers, therefore they can spend more to capture them.
Focus on advertisers with the highest lead value. Your potential for revenue depends on providing quality leads to your advertisers.
- Prevent “banner blindness”. Highly targeted ads can catch user’s attention.
- Your site’s E.A.T also affects your ads. If your site has the expertise, is authoritative and trustworthy, the ad on the site are seeing as trustworthy too.
FAQ’s About How Much to Charge for Advertising on Your Website
How much should I charge for direct ads on my website?
It depends on your website and audience. You can charge a flat fee amount per month or per ad. You can charge per number of impressions or per click or other action.
How much do ads pay per click?
The average cost per click in Google ads ranges from $1 and $2 for search ads and under $1 for display ads.
How much money can you expect from banners?
On average, you may expect to earn between 0.3 cents per impression and a CPM of $3.
Why a Monetization Platform Can Be a Solution
A monetization platform gives you the opportunity to tap into the best pricing schemes without the hassle. CodeFuel is a complete monetization platform, where you can leverage search and display ads for your site. The platform bases the ads on high user intent, thus maximizing conversions and optimizing the user experience.
Learn more about how to optimize your advertising monetization by contacting us.