[thelist] OT: Explanation on website advertising?

[James Hardy]

Todd Richards wrote:

>I have a site that I am getting ready to launch, and expect there to be
>interest in banner advertising.  However, I'm a little confused on how
>people are charging for this.  I see everything from "views" to "clicks",
>and the rates definitely vary.  What is the standard, and what is the best
>way to go about tracking this?
>
>I appreciate any input or experience you might be able to offer.
>
>Todd
>
Hi Todd.

In my experience there are are three basic models for paid advertising, 
pay-per-view, pay-per-click and pay-per-sale. I'm not sure from your 
description whether you are looking to host other people's banners on 
your site, or pay other people to show your banners to promote your 
site, or both. so I shall try and explain for both sides.

pay-per-view is where the advertiser pays the website for every time the 
ad is shown on the site. This used to be a lot more common, however it 
turns out that people don;t tend to click on banner adverts much, let 
alone buy stuff once they have clicked through, so the advertiser ended 
up paying a lot for not much return. If you are looking to sell adspace 
then this is the #1 target as it doesn't matter if your visitors click 
through or not. You'll have a hard time finding advertisers willing to 
pay for this, even the dodgy porn ones seem to have got out of this 
market. If you are looking to avertise - steer well clear of this one.

The second and most popular form is pay-per-click. In this model the 
advertiser only pays out if a visitor actually clicks though to the 
advertisers site. Some of the dodgy ones allow this to be from 
unrequested pop-ups but most insist on an actual person doing an actual 
click (more valuable for the advertiser as it is someone who is already 
interested in their roduct). This most likely be at a set rate of a few 
cents per click-through. different advertisers will be willing to pay 
different rates depending on how much they value a visitor. The 
important thing for both advertiser and ad-space seller is to find a 
good match. If you are a woman's lifestyle site, adding a link to 
motorsports is probably not a good idea, even if their CPC rate is 
higher than something more appropriate as you will get less people 
clicking through, making you less money. Likewise for the advertiser if 
you will get many clicks from a site as you complement each other, your 
clicks will probably be more valuable as they are likely customers. If 
you are using a big advertiser network, ensure your site is categoriesd 
with them correctly and that the ads are showing up in appropriate 
places/ the ads being served are appropriate to your site.

The third form is a commision based system where you get paid only if 
the click results in a sale. this can be very good for site on a 
specific topic. Eg a site about films could do a partnership with a dvd 
retailer and link directly to the product to their site. This requires 
the most management to ensure appropriae product choice but can be quite 
lucrative 5% of a $20 sale = $1, a hell of a lot more than the 1 or 2 
cents youd get from a CPC. Likewise for the advertiser you only have to 
pay if you make a sale (and therefore profit) so you don't get burnt by 
having to pay a fortune for an ad campaign that results in no sales.

Phew. wrote a bit more than I intended to do. Hope this helps though
James