Understand the Costs Associated with Each Campaign Type
BY Lane McCulloch
Now that you have some estimated budget figures in hand, you can get more specific by looking into the various banner ad pricing structures available. Of course, you'll want to choose the most appropriate structure for your particular campaign type, whether your objective is branding, traffic-building, or immediate sales. Read on to learn how the various pricing plans work, which one best fits your advertising goals, and what you might expect to pay for one.
Learn the Costs Associated with a Branding Campaign If you intend to run a branding campaign, you will most likely be paying for banner ads in terms of "impressions." An impression is the display of an ad on a page of a publisher's Web site. This model is similar to print advertising, offering the same advantages, chief among them the ability to brand your business's name by placing it in front of thousands of potential customers ("eyeballs"). Unfortunately for the advertiser, it also carries the same disadvantages as print; you only know that readers have had the chance to see your ad, not whether they actually looked at it or thought about the information you impart in it.
CPM, or cost per thousand is the measurement most commonly used when buying ads for a branding campaign. Generally, the advertiser purchases ad placements in 1,000-reader increments. Thus, the cost for 30,000 impressions at a site that has a $15 (U.S.) CPM is $450.
CPMs vary widely from site to site. High-traffic sites with demographically desirable readers may demand a CPM of $65, while the CPM of a low-traffic site with an unfocused readership may be as low as $1. As you browse rate cards (a good sampling is available at Ad Resource) and begin talking with ad sales reps, bear in mind that very few sites are actually able to charge their listed CPM rates. There is an overabundance of Web ad space, so you will often be able to get publishers to give you substantial discounts.
Learn the Costs Associated with a Click-Through Campaign If the goal of your ad campaign is to get people to visit your site, you don't want to pay for impressions. As an advertiser, you want to pay for only those customers who actually click on your ad, and that's just what click-through rates (CTRs) allow you to do. A CTR is calculated by dividing the number of times an ad is clicked by the total number of times it's viewed. Thus, if a banner ad is viewed by 200 site visitors, 10 of whom actually click on the ad, the banner ad has a 5% CTR.
Widespread adoption of CTR-based ad pricing has been slow for a couple of reasons. First, CTR pricing transfers the risk of a bad ad from the advertiser to the publisher - if you run a lackluster ad, the publisher loses two ways: low ROI and the lost opportunity cost of site real estate that could have been used by a more productive ad. Publishers also point out that advertisers still get branding value each time an ad is served up, whether or not it's clicked on. Despite these objections, click-through pricing is now available from a number of companies. In today's market, you can expect to pay from $0.10 to $0.20 per click.
One note of caution: If you do buy ads based on a click-through model, you'll want to make sure that you compare the click-through data you get from the publisher or ad network with your own server logs.
Learn the Costs Associated with a Sell-Through Campaign Just as click-through campaigns do, sell-through campaigns entice visitors to go to your site. However, the sell-through beckons those visitors to go one step further and actually make a purchase. Thus, the sell-through ad pricing model is based on actual sales that result from an ad. (A well-known example of this model is Amazon.com's Associates Program, which pays a commission to Web sites that refer visitors back to Amazon.com.)This is where knowing your ideal cost per sale (CPS) metric comes into play. Because most sell-through campaigns target a particular product, you can focus on what you've determined to be the cost of selling one unit of that product and then find associate programs that fall within that budget. Keep in mind that it will make sense to negotiate a CPS (cost per sale) as either a percentage of the sale total or as a set dollar figure, depending on the type of merchandise you sell. For example, if you sell CDs, a CPS of $5 isn't very attractive, but if you're selling a $20,000 car, it looks pretty good. The industry CPS range is $1 to $15, or 5% to 30% of the purchase price.