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We want to start selling ad space on our niche website, however are unsure at what factors make up the ad price.

We will start offering ad space once we are getting 3k-5k visitors per month. Based on this monthly traffic, and considering the ads will be highly targeted based on location, how should we go about establishing pricing for these ads?

What ad sizes and formats should we use, and what other factors should we be thinking about before setting any prices? Also, what is acceptable in terms of raising prices as our traffic increases?

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It's about managing supply and demand - if you raise prices too much the advertising revenue will drop off. Experiment with different formats and layouts. Don't wait until you think you have enough visitors - just start experimenting. Even if you are charging very little it is worth it just for the practice at managing ads. – edralph May 6 '11 at 11:07

6 Answers

up vote 5 down vote accepted

This answer is not meant to contrast with Genadinik who I think is spot on.

But-- there are scenarios in which doing your own advertising might make lots of sense.

This is so dependent on the nature of your website and the relationship you have with your visitors. It is depends on the demographic profile of the visitors.

For example -- if your niche site is for high net-worth accredited investors seeking information about cutting edge green technology -- well, then I have a client that would be very interested in advertising on your site.

If you your niche is very specialized and you are attracting a significant market share of a valuable market that traditional advertising has a difficult time reaching on the internet -- then you should launch your own advertising. If not -- gain traction by using something like Google advertising to develop a marketable value for your site right now.

There are obviously different types of advertising that have different value for advertisers. Brand development and awareness campaigns have a different perceived value that identification of qualified leads. where your site fits into this equation will determine its value.

If the business model of your site is to make money through advertising -- the prospective advertisers are your customers. You need to understand the product that they are seeking. And you need to understand how they are going to want to receive that product. Your site needs to be organized, marketed, and sold in a manner which connects the customer with the product they want.

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up vote 4 down vote

What ad sizes and formats should we use, and what other factors should we be thinking about before setting any prices? Also, what is acceptable in terms of raising prices as our traffic increases?

If you are thinking about getting into the business of selling adverting, the place to start is the Internet Advertising Bureau (IAB) website. Certainly, you should definitely be using the IAB standard recommended sizes. This will save lots of trouble relative to having advertisers submitting you creatives. Also, there are very standard contracts used for working with advertisers and their agencies. See the terms and conditions section of the site.

Next, relative to pricing, my first recommendation is to start out as absolutely high as possible. This is for three reasons:

1) It's hard to know your prices are too low. Customers will tell you if they are too high and you can always negotiate a deal down to what they can afford or what they think the traffic is worth to them. At the beginning, every deal closed is realistically going to be a negotiation and if this is a very niche thing, it might stay that way forever.

2) From a customer perspective, it's always easier to lower prices than to raise.

3) As time goes on, presumably your inventory will be increasing and so there is a supply and demand thing going on. If you have limited high quality niche targeted inventory, you want to be selling it to the company that is willing to pay the most for it. Setting your price high then is selecting in such customers. After you have more inventory available, by implication you will probably want to start lowering your price to fill the inventory and in the end be optimizing total revenue generated by the site.

Relative to when you start to consider selling advertising, you have to have enough inventory available to even make it worth your trouble. For example, let's assuming with a decent niche targeted site you could get a $10 CPM. If you had 100,000 impressions to sell per month, this would be only $1000/month. Worth the trouble!? Don't know. You tell me. Now if this is really high quality niche stuff and you could get a $100 CPM or maybe even a $200 CPM, then that would be $20,000 month and probably well worth it. Not a lot of sites can get those kinds of rates, but they definitely exist for vertical niches.

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up vote 2 down vote

You should not do this. If people pay for ads, they will just get AdWords. It will probably have better conversion than your traffic, and it will have no management time overhead, as there would be in dealing with small sites like yours for a bigger advertiser.

Does that make sense? It just isn't viable unfortunately.

Wait to 50k-100k monthly visitors (not page views) then the advertisers will come to you.

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Genadinik, if my site has a likely possibility of ranking #1 for my niche industry, in search results and branding, would you still recommend to wait until I have more unique monthly visitors or do you think it serves some benefit starting the advertising early and build as traffic grows as well? Also if my potential advertisers get AdWords, would it be worthwhile for me to setup AdSense on my site? – Sam May 6 '11 at 12:51
@Sam Without knowing your business, it would be irresponsible for me to advise you on whether you should add AdSense or not. Just gauge whether it is a fit for your overall plans. – Genadinik May 7 '11 at 0:25
@Sam Consider that if you use AdWords you're dependent on Google and Google is in charge. If you find your own advertisers you can build a real relationship with them and there is no third party between you and them. If you've got a blog these advertisers of yours can also play a part in creating new content, via interviews or free products to review. I also think you need to create more content and get more viewers before you monetize. Are you writing 4 or 5 posts a week yet? – MikeNereson Nov 18 '11 at 1:39
up vote 0 down vote

While I voted for Genadinik answer, I will however give you a pricing method.

  1. find the keywords for which you are particularly relevant (=very first results in the SERPs)
  2. find the price of this keywords while using adwords
  3. estimate your click through rate
  4. the price is then #visitors * CTR * average_kw_price
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Thanks for this, it aids in understanding the basics of keyword pricing. Do you have any recommendations on how very targeted demographic stats would influence the pricing? – Sam May 6 '11 at 13:28
It depends on the specifics of your market. If it is for a lunch delivery service it will influence a lot, if it is for a VOD service it won't have any. However, the influence will mainly be on the CTR on your site, or on the conversion rate (on the target site), so just try to figure out what will be the growth in those rates and you will have everything you need. – Sylvain Peyronnet May 6 '11 at 13:45
Just using the CTR does not capture the potential conversion quality differences between the two venues. I thinking you are confusing the difference between PRICE and VALUE. A really good niche site with a targeted creative could easily yield traffic 2 to 10 times better than what you'd get from a generic paid search click through. – Tall Jeff Nov 18 '11 at 0:43
The "better" traffic you mention is already captured by the price of the kw. – Sylvain Peyronnet Nov 18 '11 at 22:30
up vote 0 down vote

Sam, I have seen everything from a couple of pounds through to £50 per 1000 impressions (CPM). If this site has a very narrow focus you would be better going direct to potential advertisers. With the volume you are talking about a simple run of site sale on a monthly basis would be simplest.

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up vote -1 down vote

Figure out what your advertisers would pay to advertise using google ads for the same impressions, then cut it by 20%.

A better solution would be not to have advertisers, but have affiliates. It's the best for you because your payout is higher and it's the best for them because unless they make money, you don't make money.

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I completely disagree with this answer. This assumes there is absolutely no difference between advertising with Google ads vs. this niche site. And even then this answer implies you should be leaving 20% on the table. Selling solely based on price only makes any sense at all when you are selling identical commodities. In this case there could be huge difference is prospective value (better or worse) between the two venues. – Tall Jeff Nov 18 '11 at 0:37

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