How to charge for banner ads in a web application

Question

I'm developing a web application which contains banner ads, and I don't know how to teach my clients how much to charge their customers for banner ads. Can someone help with a book or business strategy?

Answer 1

I think this is a good article on the subject http://www.problogger.net/archives/2008/03/27/how-much-should-i-charge-for-my-advertising-space/.

The best thing to do is research what others in your industry are charging for ads of any kind on their websites and see what Google Banner ad rates go for on subject matter comparable to your site.

Once you have all of that you can create a guide for your clients to follow based off of what you have learned.

Answer 2

I ran a large non-profit site for several years and we got into the advertising game. The problem is that there's no one-size fits all answer to this question. Some factors that can influence your efforts:

1. The value of the ads is what the buyers will support. That's the genius of Google AdWords--they set the value based on the demand and what people are willing to spend. If you're asking $500 and not selling any banners, then the value obviously is less that your ask. IF you're charging a dollar and don't have any inventory, then the value is obviously more than your charging. The value will change nearly constantly, so it's up to you to identify the "sweet spot" and follow its trends up and down.
2. Your traffic has a big effect on the value too, especially if you're charging based on CPM (cost per thousand impressions) The more views you have, obviously the more you can charge. If you're charging by click through (CTR) it's important to have quality, relevant ads that people are interested in. As you put more time into advertising, will it negatively affect your content which could bring down your traffic?
3. Good advertisers (the ones who often control the most ad spends) demand metrics. How will you provide this? How will you audit it? The best (read most profitable) sites give their advertisers real-time metrics. Can you do this technically/financially?
4. How will you attract and service your customers? If they are paying you good money, they will need "attention" So, are you going to hire a staff to sell and service advertisers? Remember, you're competing against sites who have an army of people pounding the pavement every single day.

To answer the original question, unless you formulate a sort of bidding system, you're likely going to have to rely on trial and error. You'll get laughed at several times as you attempt to charge too much, or you'll overfill your inventory by charging too little, then be chastised for raising your rates. It's the reason that I recommend to everyone that unless they're serious about supporting an advertising system to come back to reality (financially speaking) and get onboard with a system like AdWords or DoubleClick. As developers and tech guys, there's so many other ways for us to make really good money!