Your website has stable, sustained and high-quality traffic.
You spent time and effort into getting visitors to your pages and now you feel it is time to turn that traffic into money.
Right after Google AdSense or similar ad services, sponsored ads on your site are the quickest way to monetize your platform.
In this article, I guide you through a step-by-step process on how to do that...
SIDENOTE: keep in mind that, while sponsored ads on your site can potentially make you more money than just Google Adsense, you’ll need to invest time and resources into:
- finding advertisers;
- negotiating with them;
- Handling the ads on your website.
My solution for flat-rate website advertising is based on a very simple, yet powerful framework.
Having a clear advertising framework is better than having a generic blog advertising rate sheet.
In fact, while that kind of sheet gives generic average prices for website banners, this framework will give you prices that are specific to your website.
Let's start by pointing out that the price you can sell a sponsored ad for, depends essentially on two things:
- how much money the ad can bring to the advertiser;
- how many advertisers are willing to pay for that ad space.
If you are just beginning to advertise on your website, you won’t have much demand for your ad spaces.
However, an advertising framework can leverage the limited space you have on one page and will allow you to profit from the competition between advertisers on the same page.
Ultimately, how much you can charge for the advertising on your website, will depend on how good your advertising framework is.
Before you begin
When you start thinking to advertise on your website you have quite much work to do before you actually get to publish anything.
In fact, you cannot just throw ad spaces on your pages and wait for advertisers to come to buy them.
For your advertising program to work, you need to figure out one thing: how much one advertiser is willing to spend on one single ad.
But first of all, advertising on your website must make sense.
This means your advertisers need to see a return on their investment.
At the very least, they need to get traffic from your website (people need to click on your ads).
With this in mind, you want to avoid placing ads on pages with very small traffic.
At this point, your focus has to be on asking the right question:
DON’T START BY ASKING
“how much should I charge for advertising on my website?”
ASK THIS INSTEAD
“where should I place ads on my website so that people can see them and click them?”
Define where to publish ads
If you place ads on a page with little traffic, chances are nobody is going to see them (let alone clicking).
Your advertisers will not get any ROI from spending money with you and they will ultimately be disappointed and cancel their subscription.
So, your priority is to identify the pages which are best suited to host your ad spaces.
Open your Google Analytics.
From the menu on the left, choose Behavior > Site content > All pages.
Make sure you set the time frame for the view to 30 days.
Now you sort the pages by Pageviews.
You should get something similar to what we have in the image below.
Your “money pages” are the pages on the top of this list.
These are the pages where you want to place your ads.
IMPORTANT: in the beginning, I would urge you to keep to a minimum the number of pages where you advertise.
In fact, you want to consider the two following things:
- when you have a few advertisers, cramming them on a few ad spaces will increase the perceived value of each space;
- if you are just starting and you need to place the ads manually, the fewer ad spaces you have, the less work you’re gonna have to do.
In our example, we decided to place ads only on just three pages:
- the homepage;
- the "houses" category page;
- the "tiny houses" category page.
Not only these are our top 3 pages for pageviews, but it also makes sense form a user journey point of view (imagine what the user is looking for when browsing that specific page... it makes sense to click on ads at this point).
Define how to publish ads
Let's talk about the framework for the ad spaces.
Ads closer to the top of the page are seen more often than those closer to the bottom.
It makes then sense to charge more for the ads on top.
We want to leverage this fact and we are going to create a structure with a “premium” full-width ad space on the top.
It is important to point out that you don't want to have many ads on one page because:
- you would have to deal with too many advertisers;
- too many ads on one page would destroy the user experience;
- giving to many choices to your visitors will result in no clicks.
My suggestion is to keep the number of ads on a page to 3.
With this in mind, in addition to the premium ad space, we are going to allow two “regular” half-width ad spaces.
The image above shows how the advertising framework looks like on desktop devices.
On mobile devices, the ads will stack up nicely as shown in the image below.
This will totally justify a difference in price for advertising in different spaces.
Remember that you are going to place these ad spaces just on selected pages and not on every page of the website.
Your advertising program is taking shape. You now you have the basic elements to start preparing a clear overview for prospect Advertisers:
- you know on which pages you’ll let them advertise;
- you know (roughly) the size and placement of the ad spaces on those pages.
At this point, we just have to figure out how much to charge for each ad space.
Define how much to charge per ad space.
It’s time to answer your number one question (remember? ...how much should I charge for advertising on my website?).
You cannot just set an arbitrary value for the cheapest ad space.
The sum you ask needs to be realistic and competitive on the market.
So, how do you figure out what's a competitive price?
Look at the alternative
Any Advertiser considering advertising on your website has an alternative: Facebook advertising.
It makes a ton of sense to ask yourself:
“how much would Facebook charge for this?”
I hope you now see where this is going…
Since you will be charging “per impression” you want to find out the Facebook CPM cost (cost per 1000 impressions).
The guys at Wordstream have done an excellent job putting together a useful resource where we can get a few important statistics. That article gives you a very good overview of the CPC (cost per click) and the CTR (click-through rate) by industry.
In our example, the industry is real estate.
Real estate has an average click-through rate of 0.99 %.
The cost per click is $1.81.
...but we are looking for CPM, aren't we?
Let’s get there.
Calculating Facebook CPM
A CPC of $1.81 and a CTR of 0.99% means we get one-click every 101 people and the cost for those 101 impressions would be $1.81.
A simple formula for converting this number to 1000 impressions is:
Facebook CPM = CPC / CTR x 10
Using the numbers from our example:
Facebook CPM = $1.81 / 0.99 x 10 = $18.28
You can clearly see how CPM depends on the industry (heavily).
To make your life easier I applied the formula above to the data reported by Wordstream.
Here you have it:
If your website happens to be in finance and insurance… good luck my friend, you are about to make some serious money!
If your website is in the apparel or retail niche… advertising is not going to bring you much money.
Calculating the price of an ad space
At this point, we have all the elements to set the price of each of the 9 sponsored ads.
The cost of the cheapest ad space will be exactly what we calculated above using Facebook CPM.
The Facebook CPM is normalized to 1000 impressions, so we have to multiply it by the pageviews we get on a specific page.
Ad space price = pageviews / 1000 x Facebook CPM
Using the numbers of our example for the Page3:
Ad space price = 4264 / 1000 x $18.28 = $77.94
It is a good practice to round down these numbers to the closest $5.
In a Google Sheet this can be accomplished using this formula:
That formula returns a price of $75/month for the cheapest ad space in our advertising framework.
Your sponsored ads price list
Now that we have defined a clear process to determine the price of the cheapest ad space in our advertising framework, we can work our way to price all the other ad spaces.
To do that, we assign a multiplier to each ad space. The multiplier depends on the position of the ad space on the page.
The table below clarifies this concept.
The idea behind the multipliers is this:
- an impression on the page will cost - at a minimum - the same money Facebook would charge;
- ads positioned towards the top of the page will cost more;
- in this example, I went with 20% more and 50% more. You are free to experiment with multipliers… but don’t stretch it too much or you might upset your prospect advertisers.
One of the main benefits of this framework is to provide ad spaces with different price points, justified by position and traffic on the page.
This way, your prospect advertisers can buy ad space they can afford and, as the cheaper ones become sold out, you can sell the other spaces for more… kind of in an auction-style ;)
Once you have the price for the cheapest as of the page (multiplier x1), all you have to do is to multiply that price for the multiplier of the other 2 as spaces on the same page.
Your ad framework table will look something like this:
The table clearly shows the price of each space.
You can see that an advertiser can buy an advertising spot on the site for as low as $75/month (on page 3).
If the advertiser wants to maximize the number of impressions he gets, he should advertise on page1.
In that case, he would pay $200/month for the ad space in the lower spot.
In this example, the maximum we can get from an ad space is $405/month.
This is for the top spot on the homepage (page1).
The maximum amount we can get from this advertising campaign is $1815/month (but we are going to increase that... keep reading).
Again, these numbers are solid because you did not pull them out from a hat but you based them on pageviews and Facebook CPM.
Of course, the multipliers take the price up, leveraging the healthy competition between advertisers.
Is this unfair?
Ok, let’s suppose it is unfair… then the only fair price is the one for the “Lower Space 2”, which has multiplier x1.
Let’s suppose advertisers have no problems with that and they’ll buy those spaces. Your “Lower Space 2” spots are sold out.
...and this is the beauty of advertising only on 3 pages: SCARCITY.
By restricting the number of ad spaces, you introduce scarcity in your advertising business model.
Now if a 4th advertiser wants to advertise on your website he has to buy a more expensive ad space… which price is justified because it will push down the one in “Lower Space 2” that was already on the page.
It is a beautiful model.
A last note about price
Your prices need to be stable in time (you don’t want to update them constantly) so you must take a sufficiently long timeframe to calculate your pageviews.
For this example I used 30 days but, for practical applications, I’d recommend you base your pricing on 90-days pageview data (more stable and realistic).
NOTE: if you use 90 days you will have to divide the pageviews by 3 in order to be able to use the formulas above.
Offers, Packages, Discounts
Your ad spaces aren’t going to sell themselves.
You’ll have to put together a clear set of offers and reach out to prospect advertisers.
Your offer for advertising spaces
You can sell ad spaces one by one or in packages.
Either way, I recommend you sell the space for a minimum period of 3 months.
This way you obtain two major benefits:
- you ensure yourself a fixed income for the next 90 days;
- both you and the advertiser will have less work on your table (instead of having to negotiate prices each month).
So, in our example, in case we are closing a deal for the cheapest ad space $75/month), we’ll propose $225 for 3 months.
If an advertiser wants to buy the most expensive space ($405/month), then our offer would be $1215 for 3 months.
They tell us: “no can do...our advertising budget for 3 months is no more than $600.”
What do we do then?
Easy, we offer them the cheapest space on the same page, for exactly $600 for 3 months.
If that space is not available anymore, then we can offer them 2 spaces on page 2 and 3 spaces on page 1.
You get the idea.
Discounts & upsells
What if the advertiser wants to buy ad spaces on more than one page?
They make your life easier.
Wouldn’t it be fair to give them a discount?
Note that you can also use that very discount to “ease” them into the deal.
In our advertising business model, we propose a discount of 20% to advertisers who want to buy the same ad space on all pages (see the column “Discount” and how it compares to the full price in “Space Value”).
On the contrary, if an advertiser wants to be the only one to advertise on one page, we propose him an “exclusivity” agreement for a premium of +20% on the nominal price of the three ad spaces on the page (see the row “Exclusivity” and how it compares to the nominal price in “Page Value”).
With the exclusivity option, our revenue potential increases from $1815 to $2178/month.
Scale it up
Once the advertising program on your website is providing a nice and stable income stream, you can think about upping your game a few notches.
Here is a simple process to do that...
Stage 1 - Create a list
Keep in mind that the more people line up for your service, the more valuable the service becomes.
Consequently, one of your priorities should be to get prospect advertisers to know about your offer and to make them line up for it.
When all the ad spaces are sold out, give prospect advertisers the possibility to sign up to a waiting list.
Once the list reaches 10 times the number of your available ad spaces, you’ll open doors for the sale of those spaces.
Stage 2 - Raise the price
Once you have many advertisers lined up for the same ad space, you can afford to raise the price.
Provided you have a waiting list of a good size, I would suggest you increment the price by 20% every 3 months.
This way you’ll be doubling the revenue of your advertising program each year!
Stage3 - Auction the ad spaces
If you have the technical capability or if you can use platforms like eBay, you can auction your ad spaces.
Auctions maximize your chance of making money but they come with a certain risk since you’d be shifting the business model and this might upset some advertisers.
Using a framework to determine where to place your ads and how to stack them on the page, will give you a pretty solid argument to justify your pricing structure.
This argument is even more solid when you drive the advertiser to make a comparison with what they would spend on Facebook for a similar service.
On top of this, you have another advantage: your website focuses on one topic (niche/industry) and the visitors reaching your pages are highly interested in that topic (niche/industry).
In other words, your traffic is very focused and the ROI for the advertisers should be better then the ROI they would get with Facebook advertising.
Remember that people don't spend time on Facebook to buy but they're just hanging out with friends and advertising is just disturbing them from that activity.
On the contrary, when people come to your website, they are indeed looking for information or product/services which are related to your industry.
Use the argument above when negotiating with your prospect advertisers.
Finally, craft your pricing structure with multipliers as explained in the article and put together a good set of offers, discounts, and exclusive options.
Lock advertisers in for 3 months and don’t ever stop marketing your services.
Creating a waiting list is the key to increasing your income from sponsored ads on your website.
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