I got an e-mail today from a friend who also is a website publisher. He is interested in making some changes in the way he does business. Here is an edited version of his e-mail to me (edited so that he remains anonymous):
I have a question about advertising. I know at one point it seemed like you had more Google Adsense ads on your websites, but now you have quite a few from companies and such.
One of my websites seems to be poised to go to the next level. It has been doing well recently. I sent out an email with new ways to advertise on the site and several companies came back with wanting to do even more advertising like banner ads. I have no ethical problem with that and actually have some empty spaces available. However, I wonder about replacing some of the Google ads with banner ads. Not entirely clear how I would even calculate how much the space is worth. I think ultimately that is where the money is for this site; just unsure how to make the transition.
Any pearls of wisdom to share?
I think that the direction you are moving with your site is the correct direction, at least from my experience they are.
You are correct that I have moved away from too much AdSense on most of my sites. You know what, though? In making that change, I really learned that less can be more, something that is not always believable. What I found was that instead of getting 50 clicks on ads, and having those clicks pay a low amount, I now get 20 clicks and they pay a higher amount for each click. On some sites, I have actually gotten down to where I have only 3 or 4 clicks per day, but they are paying a very nice amount! Amazing!
I think that the reason for this greatly increased click value is that with less ad space to sell, you have more premium advertisers. In other words, if you have enough slots for 20 advertisers on your site, you get all the guys paying big money and not the guys paying tiny amounts. When you cut way back on ad slots available, you tend to eliminate those low-value clicks. Now, don’t make a change and expect that the next day you will see these per click changes. It takes time for everything to settle out before you see the effect. I predict that you will see it, though.
As for pricing the ads that you sell yourself, I also had a big problem trying to figure out what my ads were worth. The first thing that I would recommend is to not think on a “per month” basis. Instead, think on a “per thousand” basis – charge your customers on a price for every thousand times that their ad is viewed. There are a couple of advantages to this. Firstly, it’s easier to sell an ad that you are charging $1.50 per thousand views than one that is $100 per month. In reality, you might be making more than $100 per month, but to the advertiser to hit them with $100 sounds a lot bigger than $1.50 for every thousand impressions. As for what the price per thousand impressions should be, I took my guidance from Darren Rowse (Problogger.net) who is most certainly an expert when it comes to advertising online. He wrote a column some time back in which he suggested that the mean price should be around $1.50 for every thousand views. If you have a relatively young blog with fewer readers, you can go down to $1 or even 50 cents per thousand in order to attract advertisers. If you have a pretty good site, perhaps you could get $2 per thousand.
In order to track the advertising, and provide accurate information to your advertisers, I will recommend software that I use. It is called OpenX. I use the OpenX software on my own server, but they also offer a system where they will serve the ads for you. With this system, the ads will be served up in random order, and at the end of the month, you can give a report to your advertisers that will tell them how many times the ad was viewed, how many clicks, etc.
Anyway, this turned into a long e-mail, but I hope that it provided the information that you are looking for.
The pricing advice is pretty sound, Bob. I will say that my eyes are really being opened here becuase I sort of thought the CPM advertising was on its way out. However, I was looking at the world through dirty glasses. There is still alot of CPM being done, and it makes good sense for both the publisher and the advertiser. I’m going to take a look at OpenX … sounds worth it.
Many people need a real tutorial on AdSense. They just have not been exposed to the concept of supply and demand … becuase the maximum cost for a click _can_ be, say, several dollars is no indication that it _will_ be anywhere near that much. Google has had so much success because they give the advertiser clicks for the lowest possible price … if there is space on the site for an ad, Google will charge the advertisier only as little as apenny more than the last ad served …. so if you have cheapies even the expensive clicks are going to serve very cheaply … keep the space scarce and the payment per click will certainly rise … sometimes dramatically.
@Dave Starr: I think that you will find OpenX well worthwhile. I started running that software in an earlier generation when it was called “PHPadsnew” but they changed the name about a year or so ago, and made some big upgrades.
I think that CPM is pretty much alive and well in the advertising market today. I use it fairly significantly.
Excellent advice, Bob. I am sure that your friend found it quite helpful.
I find the part about charging per thousand particularly interesting. Always learning!
@Tom N: Yeah, I think that my friend was appreciative of the advice! He just e-mailed me earlier today.