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I'm setting up an ad-supported website and trying to work through the numbers. I came across this article that gives a model. Being a newb at advertising, I've got quite a few questions:

  1. For CPM and CPC advertising, does it really take 1M pageviews to earn 3-4,000 pounds? If so, I'm screwed.
  2. Also, his model shows that CPM produces MUCH better revenue. Under his model, CPM KILLS CPC, even though he's using 20% of the ad space for CPM while using 100% for CPC. I was under the impression that CPC was the better revenue generator, no?
  3. Why is he assuming only 20% of the inventory is used for CPM while assuming 100% for everything CPC?
  4. On his CPM example, he has a clickthrough rate (.10%)...isn't the CTR irrelevant under a CPM ad?
  5. Why does he assume the CTR is 10x higher for CPC vs. CPM? Practically speaking, the user doesn't know if the add is CPC vs. CPM, so the CTR should be the same, right?

Sorry for so many questions all in one, but I'm just very confused and would like a little insight from someone familiar w/ ad-supported websites.

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1 Answer

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Watch out a little here, M in CPM is Thousand not Million.

  1. Yes, unless you are in a specialized niche 3-4 pounds CPM is realistic, and probably on the high side.

  2. It depends what you are selling. If you sign up for Google AdWords, you can get an idea (first page bid) of maximum CPC rates in a particular business area. These range from $0.05 to $20.00. You probably won't have the pool of advertisers competing for your business and therefore won't be able to charge as much

  3. Dunno. My powers of psychic reading are not good enough to divine the author's intentions. Ask the author what he is thinking.

  4. If a CPM ad isn't generating any clickthroughs, it is unlikely that the advertiser will pay you any money.

  5. See (3).

Don't forget the Cost Per Action model too. Depending on your niche this might be more or less profitable. It has the advantage that it can be made more fraud resistant.

(These observations are from somebody who occasionally buys CPM/CPC advertising.)

[Edit] Reading through the article, it looks like he is more interested in showing how to estimate revenue than making any specific recommendation. The CPM/CPC figures look on the high side except for a site with a valuable niche. Note that the author states the figures in the example are several years old. (4) may be just to enable a comparison between the various models.

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