I realize some of you may be to new to the world of online advertising, so before we go any farther, I'll take a moment to explain some of the basics.
To assist with my description here, I've bolded some words you may be unfamiliar with, and listed their definitions down at the bottom of this post.How Much Money Can I Make Advertising Online?The amount of money you make advertising online is closely tied to your website traffic.
Advertisers aren't paying YOU to look at their ads, but for the
visitors on your site to see them.
So with more traffic, I'll make more money, right?
This depends. Advertisers base all payouts to a
publisher on some sort of
valuation method. CPM,
CPC, and
CPA are the three you'll see most often. Each of these three valuation methods has its own ups and down for both publisher and advertiser, and they are by no means the only ones in use, simply the three you are most likely to encounter.
CPM deals are measured by number of
impressions. An impression being a single view of an ad. Say you had a $3.00 CPM agreement with an advertiser. What this means is that for every 1000 impressions of a particular ad, you'll get paid $3.00.
For a publisher, CPM deals are the easiest money, as the viewer of your site doesn't have to interact with the advertisement at all in order for you to get paid. Put simply, the more people you get viewing your site, the more money you make!
CPC, or Cost Per Click, is a valuation that uses actual mouse clicks on an advertisement as a guage. A $1.00 CPC deal would mean you make a dollar every time a viewer on your website clicks on the particular advertisers ad. The
payout on CPC deals tends to be much higher than with CPM, but the actual money you make can vary wildly.
A site with particularly good
ad integration could see
click through rates on advertisements as high as 10%! This is exceptionally high, and most people will never see this. On average you can expect a click through rate of 0.1% to 1%.
With both CPM and CPC valuations, the advertiser may apply an extra condition wherein they only count
unique views or clicks. They don't want to pay you for the same person viewing or clicking the ad over and over again.
Finally CPA, or Cost Per Acquisition. With this valuation method, every time a visitor to your site signs up with an advertisers service
via a link or advertisement you are showing, you get paid. It may help to think of CPA deals as comission based, i.e. when you send the advertiser a paying customer, you make a comission on that sale!
The money you'll make for CPA deals is huge compared to what you will see with CPM or CPC valuations. As an example, I once dealt with a web hosting company that was paying $200 for each customer I referred to them who signed up for a years worth of service.
The caveat here is that viewers to your site will hardly ever click through an ad to go sign up for a product or service. I know this from experience. You can expect an
acquisition ratio of about 10000:1 on the high end, which works out to be only 0.01% of your traffic! Another downside here is your visibility into the actual purchase. Since the user has gone off to another website, you can't know for sure if a purchase has actually been made.
Which valution method should I use?Advertisers set the terms of the deal and you take it or leave it. Your only choice here tends to be what advertisers to use, although sometimes you'll be given a choice between several different programs with the same advertiser.
Don't limit yourself to just one advertiser!
Having a mixture of ads from several different companies makes your website stand out a bit more, and provides some variety. Each advertiser has their own type and style of ads, and will appeal to a different people. By mixing it up a little you increase your chances of making more money!
If you have any questions, please leave me a comment, or email me directly. I promise to answer!
DEFINITIONS
valuation method - The way an advertiser determines what your site is worth to them, and what to pay you in dollars and cents
advertiser - The company providing you with the advertisements
publisher - You! the owner of the website.
viewer / visitor - A person viewing your website
impression - Showing an ad a single time (100 impressions == 100 views)
uniques/unique impressions/unique visitors - A viewer that hasn't seen or clicked the advertisement before.
Generally based on IP address, coupled with a time span.
CPM - Cost Per Mille (Thousand)
CPC - Cost Per Click
CPA - Cost Per Acquisition
ad integration - Refers to the placement of your advertisements.
Putting ads on your site in a way that blends them seamlessly into your content, and makes viewers more likely to interact.
click through rate - a percentage, calculated by taking the number of clicks divided by the number of impressions
acquisition rate - a percentage, calculated by taking the number of acquisitions divided by the number of impressions
payout - The dollar amount you actual get from an advertiser
Labels: advertising basics, click through rate, CPA, CPC, CPM, online ads, valuation