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The Internet is really unlike any other advertising medium out there, and as a result it's had to develop a whole new set of advertising parameters. Traditional advertising rates have been typically based on ad exposure to the medium's audience -- the larger the audience, the more the medium can charge for its rates. Rates charged in traditional advertising are typically measured in "CPM," or "cost per thousand," where the thousand is equivalent to the number of viewers, readers, listeners, what have you.
When advertising on the Internet began, it too tried a CPM model, in this case the thousand being the number of times the ad - typically a banner - was shown. This was then referred to as an "ad impression," and for a while, it served quite well as a model. Over time, however, the CPM has somewhat lost its appeal, in part due to a lack of universal auditing of the media, and in part because of the declining rate of response to Internet ad banners. As banner ads have proliferated on the Net, the click-thru rate (or "CTR") has dropped to an industry average of 0.5 - 1%. And because the Internet can generate direct response measurements more quickly than any medium before it, advertisers are no longer satisfied to just have an ad banner out there on a site doing nothing - they want results, they want action….they want a CLICK.
This need for action has led to a new model of advertising altogether: the "cost per click" (CPC). In a CPC model, the advertiser only pays if the web site visitor clicks on their ad. Let's take a moment to show some examples of the two models so you can compare. In a CPM model, if a web page gets 100,000 IMPS in a month (not bad) and charges $25 CPM, it will be generating $2,500 that month in advertising revenue. In a CPC model, if this same site charges $0.50 per click, using the industry average of 0.5% CTR, that same web page will generate only $250, a significant difference in what the advertiser has to pay.
So why would a site owner even consider a CPC model at all? Ladies and gentlemen, welcome to the "digital divide" of Internet advertising. If your site is one of the established big boys and brings in loads of traffic, then you can get away with charging on a CPM basis. You can even have your ad inventory space brokered through a large Internet advertising network like DoubleClick or Adsmart, making sales of your space more likely. If your site's traffic is however, shall we say, mediocre, then you don't have the luxury of being so choosy if you're really hoping to make a living at this selling ad space thing. You've either got to substantially lower your CPM rates,or consider selling by CPC (or a combination of both models) in order to attract advertisers at all.
If you're a small site owner, there's help for you, too. You can sign on with one of the Internet advertising networks that include your site in their harem of small target categories and sell advertising at a discounted CPC price (usually $.50) in exchange for a commission (about 50%). The most popular networks like this are Flycast (http://www.flycast.com), ValueClick (http://www.valueclick.com), and Advertising.com (http://www.advertising.com, the ad network formerly known as Teknosurf). All of these networks sell bundles of "targeted" ad space on small web sites (25,000-250,000 imps per month) on a CPC basis.
By going this route you're more assured that your advertising space is going to be filled, you don't have to put up with the headaches of running your advertising program "in house," and at least you'll be making money whereas otherwise, you might not be making any at all.
Another avenue is to list your site for free on directories of sites that sell ad space like TheAdStop.com (http://www.theadstop.com) or AdBase.net (http://www.adbase.net). Obviously, these sites are also good resources for those of you looking to buy inexpensive advertising.
Some sites that charge on a CPC basis are getting clever by devising ways to influence the user to click on the ads. At Lucky Surf (http://www.luckysurf.com) for example, in order for a registered user to enter to win the daily lotto, they are forced to click on a banner advertisement. Lucky Surf also affords a web publisher the opportunity to boost advertising revenue by placing paid-for text links on Lucky Surf's site or in their newsletter that run on the same CPC model.
The more proven these kinds of models are at generating click-thrus, the more likely the ad rates are to rise, and the more viable revenue source they become. It's not impossible to make money selling ad space on the Internet these days of the digital divide, but it sure does require more than just throwing up a web site.
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This article was provided by Web Ad.vantage, Inc. (www.webadvantage.net), a creative Internet marketing, promotions and public relations firm specializing in strategy building and implementation.
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