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How Much Should I Charge for my Advertising Space?

In this post Daniel Scocco answers to another question on the Problogger Question Box (and a question that I get asked a lot). Brian Auer asks:

What about [direct advertising] pricing? Are there any good ballpark price structures? What do we base rates on?

As soon as a blogger decides to play with direct advertising, the question of “how much to charge” emerges. If you charge too much, you might end up with no advertisers at all. If you charge too little, on the other hand, you will be leaving money on the table.

Unfortunately, as Brian wonders, there are no standard pricing structures across the Internet. You will need to take a look around, do some research, and experiment on your own site to find the rates that will maximize your revenues.

That being said, that are some methods that you can use to draw an initial price tag, and some specific places where you can look to cross check the numbers. Below we will cover them.

Defining the metrics: The CPM

Notice that talking about advertising prices in absolute values is useless.

Suppose there are two blogs. One charges $500 monthly for a 125×125 banner spot above the fold, while the other charges $1,000 for a similar spot. Could we say that the first blog offers a much better deal for advertisers?

Obviously not, because the value that the advertiser will get for its money depends on a myriad of factors, above all the traffic that each of the two blogs receives monthly.

If the first blog generates 100,000 monthly page views while the second generates 500,000 monthly page views, an advertiser would be better off by purchasing the advertising space of the second blog for $1,000.

As you can see, the answer to our question comes from a very simple ratio: cost of the advertising space divided by the traffic that the ad will receive.

Several metrics could be used to define traffic, from unique visitors to visits and page views. Most publishers tend to use page views though. Moreover, it is a common practice to measure page views by the thousands, so one should talk about cost per 1,000 page views or impressions. CPM is the term for that, and it stands for Cost Per Mille (Mille being the Latin word for 1,000).

Just to conclude our example, if you do a small calculation you can see that the first blog has a $5 CPM while the second one has a $2 CPM.

Now, we are not suggesting that you should tie your ad rates to the number of monthly impressions of your blog. Offering a flat monthly rate to advertisers is usually the best (and simpler) way to go. Just keep the CPM numbers in mind because they will enable you to compare your prices with those of other bloggers.

What do other bloggers charge?

Like it or not, the Internet behaves like a giant market place, and all websites are subject to the laws of supply and demand. In other words, if you set a price that is significantly higher than the one used by other blogs on your niche, the advertisers will go somewhere else.

The first thing you should do, therefore, is to take a look on blogs that sell advertising space to evaluate what rates they are asking.

The format of the ad (e.g., 468×60, 120×600, 125×125) and the position (e.g., header, sidebar, footer, blended with content) are factors that will directly influence the final price, so in order to be consistent through out your research you should pick a format and position that is popular.

Among blogs selling direct advertising space the 125×125 button ad on top of the sidebar is arguably the most used format, and it should fit our research purpose.

Let’s see what popular blogs on the online marketing sphere are charging, for instance. If you visit the Advertising page of Copyblogger, you will find that the blog generates over 1,000,000 monthly page views, and a 125×125 spot on the sidebar costs $1,500. Divide $1,500 by 1,000 (remember that 1,000,000 is equal to 1,000 times 1,000 page views) and you get a CPM of $1,5.

Similarly, if you visit JohnChow you will find that the 125×125 button add costs $500 monthly, and the blog generates 300,000 page views. Again just do $500 divided by 300 and you get a CPM of $1,66.

As you can see a CPM of $1,5 for the 125×125 buttons is a good average. Even TechCrunch charges a similar rate ($10,000 for 6,5 million page views monthly, converting to a CPM of $1,53), so let’s keep that number as a starting point.

Adapting to your own situation

All the blogs mentioned are viewed as authorities on their niche, which affects how much advertisers are willing to pay to get exposed to their audiences. If your blog is new or if you are just beginning to experiment with direct advertising, therefore, you probably should start with a lower CPM.

Start asking a $0,5 CPM, for example, and as your blog grows and more advertisers come along you can gradually raise it. If you have a blog generating 100,000 monthly page views this would translate into $50 monthly for each 125×125 button placed on your sidebar.

If you are going to use other ad formats or position the ads on other locations of your website just estimate how these factors will affect the traffic that an advertiser will end up getting. Placing a 300×250 banner on the sidebar, for instance, is similar to having 4 125×125 ads, so you could charge 4 times the price of the 125×125 ad ($200 monthly if your blog generates 100,000 impressions, converting to a $2 CPM).

Similarly, increase the CPM if the ad is on the header or blended with the content, and decrease it if the ad will be displayed below the fold or on the footer.

Keep in mind that you should consider real page views for these evaluations. Most web stats programs and software tend to over estimate the traffic on your site. Google Analytics is usually the most reliable one.

Cross checking the numbers and experimenting

In order to cross check the numbers with an external source you could join an advertising network (either CPC based like Google Adsense or CPM based) and use it on the spots where you plan to sell direct advertising.

If you are planning to sell a 300×250 banner spot below your posts, for instance, you could firstly put a Google AdSense unit there and measure the CPM that it will give. Most direct advertising deals should bring you more money that what advertising networks do, mainly because you are cutting out the commissions and negotiating directly with the advertisers.

Finally, remember to experiment endlessly and draw your own conclusions. What works for one blog may not work for another, and vice-versa.

Over to you

Defining optimal advertising rates is a tricky business, and I recognize that the methods and strategies described above might not work for everyone.

What other methods have you used on your blog? How did they work?

This post was written by Daniel Scocco from the wonderful Daily Blog Tips.

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Comments

  1. Ryan D. says:

    Well put, I’ve been looking for a baseline to go off when I start charging for advertising and I will start with the suggestions stated above. I often see sites that charge way too much for what they offer but the odd part is people are buying the ads which is ignorance on both parts.

  2. What a great article, I’ll be saving this one closely.

  3. Awesome! This is just the stuff I needed to hear as I’m redoing my advertising page soon and trying to make the prices more competitive.

    Thanks.

  4. Patrick Burt says:

    Good article Darren. One thing worth mentioning is the value of the PageRank juice as well. :)

  5. Patrick, most banner advertising carries a nofollow tag or uses server redirects these days. The main reason for that is to avoid troubles with Mr. Google.

    That is why I don’t think it is important to consider the PR when trying to figure your ad prices.

    If you are selling text links or followed banners, on the other hand, you should (but this is a risky business if you love your Google traffic).

  6. Also Advertisers appear to factor in PageRank and the use of the NOFOLLOW tag as deciding factors.

    Of course, if your pagerank it high and you do not use NoFollow – there is a risk of being scrutinized by Google’s paid link algos.

    So if you had better be able to bring Advertisers more business than Google adwords – or else, they may all resort to PPCs since there will be no PR benefits from the blogs

  7. Protycoon says:

    I am currently in the process of setting up direct advertising on my site.

    And have been trying to work out what to charge for a while. I am looking at offering out some trials to begin with, then starting on a low rate, as a way of bringing in advertisers.

    Would be good to know how others go about getting advertisers.

  8. @Protycoon, we talked about how to find advertisers here:
    http://www.problogger.net/archives/2008/02/09/how-do-you-find-private-advertisers-for-your-blog/

    @Search Engine Web, most online advertisers are using a split of PPC and banners these days. One is not substitute for the other, they both work on different ways.

  9. Eric says:

    This is solid info that I’ve been looking into for a few weeks now. This is the best post on the topic that I’ve come across. It’s nice to have some conclusions and observations from those who have been there, done that. Also, thanks to Brian for submitting the question.

  10. Would follow or no follow really matter with banner ads as they have no anchor text?

  11. Marty Weil says:

    I began offering a 125×125 banner a few months ago, and I currently have two advertisers. The first banner ad just renewed their contract. My CPM is in line with the numbers in your post, although there is a sligth premium since I reach a highly niched audience and have a loyal blog following within the niche.

    I also offer paid text links at a lower price than the banner ads, and I have several advertisers who have selected this option. The CPM for text links correspondes to the averages you quoted.

    Delivering a niche audience–one difficult to reach through other means–should carry a premium, but at the end of the day, it appears that CPM must not deviate too far from the mean.

    I seem to have struck a good balance, and I have happy advertisers. However, my problem is not pricing, but rather marketing the ad space and attracting other worthwhile sponsors. I’d be interested in hearing how other bloggers go about soliciting sponsors.

    Maybe that’d be a good topic for another post?

  12. Geoserv says:

    I have just started a blog and selling ad space is definitely not an option right now, but this article will come in handy in a few months hopefully.

  13. Wow this post was really helpful. The post mentioned that going directly to advertisers yields better rates. Does anyone have any experience with this? How do I go about getting directly in contact with advertisers?

    Thanks in advance.

  14. BW says:

    Excellent post Daniel.

    A nice breakdown of the steps to consider for anyone thinking of dipping their toes in direct advertizing. I think it is also very important to have a good ‘advertise here’ page and also to have some data and stats to back up your site promotion e.g.
    Over X months, YYY page views, with vistors from, XYZ
    This information should be sued when contacting potential advertisers.

    Thanks

  15. CurlyBrace says:

    Great article Darren. Also, do you take into account the number of actual visitors and their loyalty as a factor?

    BTW, PageRank shouldn’t be a variable here. If you put links with “follow” the only difference it will make is that it will affect PageRank. So yes, in other words, advertising with “nofollow” is to let people click on your banner or to make your image popular. So what you are interested in is in the juice: How many people visit the blog!

  16. The people that read my blog complain about advertising on it. I’m in an unusual position becasue of the content.

    The Masked Millionaire
    http://www.TheMaskedMillionaire.com

  17. @MillionDollarJourney, well banners still have alt and title tags, and if the link is followed it should count for search engines.

    Most advertisers that buy banners are not looking for the link juice though but rather for clicks and brand awareness.

  18. This is a VERY interesting article, thank you for writing it :) Advertising seems to be a sticky wicket for most bloggers, and the negotiation part with advertisers is another subject you could easily write an entire post on (hint, hint).

  19. Mrs. Micah says:

    Masked Millionaire, if your readers are complaining, perhaps you should ask them what they’d like better. Maybe do a poll?

    I see, for instance, that your Adsense unit isn’t blended in with your sidebar…you can adjust the unit’s colors to match, which would make it stand out a lot less.

    If you have enough visits per month, you might be able to join an ad network (though some don’t have minimums, I think), which would be a change anyway.

  20. Sebastian says:

    Awesome Article! Thanks Daniel! I will try to market some advertising directly, soon. So this article helped me a lot to find a calculation base.

  21. Sangesh says:

    My blog ain’t a year old, and there is a little chance that I’ll find advertisers for my blog excluding the popular internet ad servers. Anyway, if I am to put advertisements in my blog, I’ll make sure that I go refer your blog first.

  22. Brian Auer says:

    Thanks so much for answering my question, Daniel! I’m becoming more comfortable with the notion of direct advertising and I’m in the process of gearing up for it. I’ve already installed my own ad server (OpenX) and I’m serving my exsisting ads through it. Once I reformat a few of the ad spots (so I can offer some 125×125 options) I’ll be putting together an advertising page that I can direct possible advertisers to. I’m also going to swap out all of my network ads (AdSense, Chitika, Amazon, etc) for some home-brewed ads that look cleaner and more professional.

    Again, thanks for hitting this subject — I really look forward to reading the comments on this one.

  23. I’ve just started designing some ads for my local businesses. Most of the ads displayed on my blog are samples done up for business people who are friends, to be able to show advertisers what can be done. I will link to the advertiser’s web page and if they don’t have one, will make one for them. Solomon’s words is a news blog covering a set geographical area rather small in nature. Advertising rates have been set very low as our readership pales to the bigger blogs, but we do cover a niche audience. Our advertising is a mixture of Google ads, commission ads, and local advertisers. Local advertising is usually tied into a news story featuring the advertiser first, and linking to that story in link advertising or display advertising. I am hoping to be able to develop enough income to justify the long hours I spend producing my blog. See how I do it at http://solomonswords.blogspot.com

  24. I think it largely has to do with not only traffic, but the marketplace as well. Look at all the popular blogs to get a good vantage point on what to charge. Of course, your niche and traffic also play a factor.

    1.5 CPM seems like a good overall number.

  25. @fortunecookienotes, yeah $1.5 CPM is pretty standard, but I think that over the time one culd aim to even raise that to number, to perhaps $5 CPM or even $10 CPM.

    That should be possible with a laser focused audience, good ad positions and durable relationships with the sponsors.

  26. alam says:

    what about other parameter such link juice, page strength as I ever see on other blog. They use it as their price power.

  27. Great advice Darren! I think a lot of people need to read this one… *=)

  28. Zath says:

    Thanks for this post, I’ve been meaning to start looking at direct advertising in addition to my Adsense for a a few months now, the stumbling block was I had no idea what to charge!

    Thanks for at least giving me a rough guideline to start from.

    Cheers!

  29. Jay says:

    Well, well, well… I guess I’m charging a very fair price for my 125×125 buttons which are ALL above the fold. And it was cheaper last month… woohoo!

    Thanks for this Darren, when people complain about ad prices I’m going be like “Well, Problogger said…” lol!

    Jay

  30. Kristen says:

    Darren- This is very good information. Interestingly enough, I have been selling advertising on blogs for about a year and although I have not been using your metrics it still turns out to be about the same when I do the numbers. It’s good to know that you count page views more important than uniques and that you prefer Google Analytics. I guess I am doing things right:)

  31. Heath Coker says:

    Remember, CPM advertising is still open to click fraud. Clicks are only as good as the valid sales generated from the cicks. Only the advertiser really knows what happens after the click. Perhaps another way to value a site is to see how many advertisers are there repeatedly or over a long period. If they are getting dollars for the clicks, they will return and advertise more. If not, there will always be new ads on a site.

  32. Carlo says:

    thanks for the post. i hope to read some more.
    Best regards from Sebbi

  33. Frugal Dad says:

    Thanks for this post. I am just now beginning to work with advertisers, and having something like this provides a great guide to baseline.

  34. Wedding Guy says:

    Great article..now I know how to charge advertisers…

    the thing is advertisers are not savvy too and always thought that cheap is good…

    so now I can educate them and share with them on how I calculate the rates

  35. fc says:

    About the point of having a 250×250 in place of 4 powerbuttons.. instead of keeping a proportionate increase of $0.5 cpm to $2 one should take it a tad higher to $2.5 or 3 .. this is for the exclusivity.. the premium an advertiser pays for not competing for eyeballs… of course this is if you have a blog with a strong brand image.. you are in a way charging for brand juice..

  36. Heath Cooker, that is a good point. Long term relationships with advertisers will inevitably come from your ability to drive value (sales and customers) their way, and not merely clicks.

  37. Dirk says:

    Great post. What I’m still curious about though is how ad placement affects pricing.

    I have a website with a 728×90 banner at the top and 300×250 alongside the content (‘above the scroll’) and my pricing is in roughly the same range as in the post above. I discovered that the 300×250 spot is in a bit greater demand so it’s priced a bit higher. I’m now looking to introduce another 728×90 unit near the page footer however and I’m completely stumped as to what I should charge.

    It’s not prime page real estate but I figure it could still be a nice option for some advertisers. Should I go as low as …. say …. 0.25 CPM? Or is the 1 CPM or-so range still acceptable for footer ads? I have nothing to compare against. Anyone with valuable insights… please let me know.

  38. Phillip says:

    Awesome article! I have been wanting to find out more about blog advertising pricing. Thanks!

  39. Mattias says:

    Thanks for a great post! Articles like these are important. Trying to figure out thing like these by your self can be very time consuming and done wrong expensive in terms of unsold advertising space.

  40. Dirk, start slow, measure the demand, and adapt.

    I would start with $0.5 CPM for a footer leaderboard.

  41. The answer is so simple: Charge as much as you possibly can without pissing off the advertiser ;)

  42. shaun says:

    Wow, I can’t wait until my site has 100,000s of people visiting it every month. I’m still building traffic for it. I don’t think I want to look for advertisers until I have more people coming to my site.

    http://www.stocks-simplified.com

  43. Bash Bosh says:

    Thank you for this article!

    Very useful for all webmasters.

  44. Nick Kanel says:

    That’s a great article! When do you think it’s the best time to start selling off ad space in terms of one’s website traffic? Any specific number of visitors?

  45. I agree with what shaun just stated, but my question is how much traffic should you be accumulating before it becomes a good time to search for advertisers.

  46. I would say 1,000 uniques daily is a good figure to start looking for sponsors and advertisers.

  47. UFC fan says:

    Thank you very much for this article it was exactly what I was looking for. Its really hard to decide what to charge for advertising space because each niche is so radically different.

  48. MP says:

    Folowing oall the comments it sounds like a post about “nofollow” would be appropriate. I know I have one page on my blog with about 35 ads and it is not getting very good google search results. i am suspicious that all the outgoing links are messing with the page’s google juice. I guess I need to figure out if I need to add no follow tags. Would love a post about this topic.

  49. adam mclane says:

    I run an ad network of niche blogs… we find that a 125×125 ad block above the fold sells easily at $3-5 CPM.

    http://adnetwork.ymexchange.com

  50. Doug says:

    I think the $1.50 CPM is a good goal to shoot for when you have a targeted audience. If sites like John Chow are in that range (make money online sites can afford to charge a lot), then you won’t get much higher.

    Plus, remember your niche makes a big difference. Some niches don’t monetize as well as others because there is less money in advertising for whatever reason (types of products that relate to the niche, etc.)

    From the few ad networks that still offer 125×125 ads (they perform horribly), they are generally in the $0.20-0.35 CPM range. Adjust that for removing the network’s cut and you’re looking at around $0.50 CPM, which I agree is a great starting point.

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