Inside Online Advertising
By Diggers Realm

A Calculator For Properly Pricing Your BlogAds And Sponsorships

The act of properly pricing your BlogAds and sponsorships on your website could mean the difference between getting consistent revenue and locking up real estate on your website at an under priced value. If you sell a spot for too little you could be regretting it in a month. As I discussed in my article, BlogAds Orders Way Up, I had some people lock in BlogAds at such a reduced rate at the beginning of December that it was going to reduce the money I would normally earn through Google AdSense in the same spot.

So, the question remains "Is it better to get guaranteed revenue or fluctuating revenue?" Well the obvious choice is guaranteed revenue and that's just what BlogAds provide. When someone buys a BlogAd on your site you are guaranteed that amount. With AdSense that number could fluctuate from day to day. The bad thing about BlogAds is that there is no increase in revenue with traffic and growth if you price them improperly.

Take these wise words from The Commissar over at The Politburo Diktat to heart.

But I have learned one thing. Do not underprice your three-month ads. Once you have 3 or 4 three-month ads locked in at a severely discounted rate, you’re committed to those ads, even if your traffic goes up. (My pricing for a week was low, maybe $10, then only 50% more for two weeks, then only 50% more than that for one month, and only 50% more for three months.) It’s that last one that hurts when you feel that you can raise rates, if you have 3 or 4 advertisers that you have committed to for three months.

“Greed is good,” comrades.

I can attest to the fact that a dramatic increase in traffic can raise your AdSense revenue by 100-200% or more for the days that the traffic is high. Over at Diggers Realm we normally have one or two days a month, on average, of huge spikes in traffic. Either we get a link from a high traffic website or something happens in the world that directly affects a topic we've discussed in the past and that we rank high for in the search engines.

For those of us who like to make a little extra money, there's nothing more depressing than seeing a huge spike in traffic and knowing that your windfall will not affect your revenue. Your advertising has been locked up at a reduced rate.

Below is an example of what I mean. The top image is Diggers Realm with both Premium spots on the left and right with BlogAds in them. The bottom image is what the site would look like without the Premium spots filled. The screenshots are in a browser at 1024x768. The blue line across the middle denotes "the fold". Everything above the fold line is what a user sees without scrolling their browser window and is typically where you're going to make most of your revenue. There are exceptions to this rule, but in general this is true.

Diggers Realm with both premium spots filled

Diggers Realm with neither premium spots filled

As you can see above in the screenshot with neither Premium spot filled the Google AdSense ads appear clearly above "the fold". The Click Through Rate (CTR) will be higher. A lot depends on your content and the ads that Google Displays there, but in general above the fold will increase your CTR by at least 50% and maybe more.

By placing a BlogAd above the AdSense ads I have basically reduced my revenue for those positions by at least 50-75% or more.

Not only that, but if I do get a spike in traffic, I more than likely will benefit little by it. So, what should you price your BlogAds? Well in my experience you should figure out your daily revenue for that spot. If you're not using Channels in your AdSense code then you will have little information on how much you make in that spot. You should set up a Channel in Google AdSense and use a separate Channel when generating code for each spot so you can see directly where your revenue is coming from.

Once you know your daily average you can then try and figure out how much to price your BlogAd. If you want to be simple about it, take the daily average and multiply it by 7. That should give you a weekly price estimate to charge. Now you need to estimate a couple of things. Generally BlogAds recommends giving a discount for longer ad buys. I think this is a good idea as well.

Is your site, over the next three months, going to remain at the same traffic numbers with no growth? This is the key question to ask yourself.

Let's do a little math. All the numbers are fictitious and we're just figuring an equivalent rate.

Average Page Views a day: 1,000.
Average AdSense Income for that spot: $10 a day.
Average revenue per visitor: $10/1000 = $.01
Average Page View growth per month over the past few months: 10%

So what should you price your BlogAd so that you receive what you're getting now? Should you charge $70 a week? I mean after all you're making $10 a day and there's 7 days in a week ($10 * 7 = $70).

Wait! One thing you may be forgetting is that BlogAds takes 20% off the top! If you are going to be displacing known revenue then you should be factoring in to receive at least as much, and probably more, than you normally would.

You'll have to do a little algebra to get to the pre 20% number that you should charge (ugh! I know).

Here's the formula: $70 = 80% of X | simplified $70 = .8X | simplified $70 / .8 = .8x / .8 | solved: $87.50 = X

So the simplified formula is: $70 / .8

If you charge $87.50 you will get $70 after the 20% taken by BlogAds.

So you should price your BlogAd weekly at: $87.50

How about pricing for a month?

A normal BlogAd publisher would probably figure out his weekly price and then base all his other prices off of that.

Hell, most just factor their weekly rate * 4 for the monthly rate. This means they are pricing for February (7 days a week * 4 = 28 days not an average 30 days). Most don't realize that by pricing at 28 days in a 30 day month they are already giving a 6.7% discount (2 is 6.6% of 30 days). On top of this they are adding another discount!

I'm all for discounts and sales, but don't hamstring yourself!

For a monthly rate you should factor in the growth figure of your site (10% in the example above). At 10% growth you'll be getting around 1,100 page views a day by the end of the month. You can be a real pompous math ass and figure your compounded daily increase over each day in the month and add it up or you can just factor it based on 10% and be done with it.

Factoring growth into your figures at 10% growth for the month:

Average Page Views a day: 1,100.
Average Revenue per visitor: = $.01
Average projected income per day: $11

So in a 30 day month that would be $11*30=$330. Then you have to factor in the overhead of 20% from BlogAds. Using the algebraic formula above: $330 / .8 = $412.50

Note that it's not the weekly $87.50 you figured above times 4 weeks ($350)

Why do you figure at the already increased growth rate? Because you are protecting yourself against traffic spikes and any unforeseen growth that may occur. We're maximizing revenue here.

How about for 3 months, what should you charge? Well that's a little more difficult to predict because of compound growth in traffic over the months.

Still factoring a $.01 visitor value:

Month 1 = 1,100 PV = $11 a day
Month 2 = 1,210 PV = $12.10 a day
Month 3 = 1,331 PV = $13.31 a day

Someone projecting growth would factor in the above months individually.

($11 X 30) / .8 = $412.50
($12.10 X 30) / .8 = $453.75
($13.31 X 30) / .8 = $499.13

Figuring on 30 day months $412.50+$453.75+$499.13 = $1365.38 for a 3 month buy.

So while Joe Blow figures his rates thusly: $70 a week
$280 a month ($70 * 4)
$840 for 3 months ($280 * 3)

I'm saying you should price it (rounding the numbers from above a bit): $88 a week $413 a month $1365 for 3 months

You can discount the above, but even with a 10% discount the 3 month deal would be $1228.5 for 3 months, $388.50 dollars more than the average Joe Blow who hasn't done his homework and doesn't know the true value of his website.

Revenue is just business and there's no reason to be a nice guy when you know you could make the same amount with AdSense. I say that you should charge even more, maybe even 10% more as a premium, than the above figures. You are giving them a guaranteed placement with an image ad. On top of any click throughs they receive they're also getting the benefit of branding their product.

Don’t sell yourself short.

Below is a custom calculator I've written in JavaScript for you to use. It makes the calculations using the above processes.

BlogAd Rate Calculator
Daily Ad DisplayDaily Income From AdMonthly Growth

You Should Charge:

WeeklyMonthly3 Month

I encourage any discussion on my above pricing or other ideas, modifications to the calculator or suggestions you may have.

Linked to the following for some exposure:
| Carnival of the Trackbacks | Stop the ACLU | Adam's Blog | Big Dog's Weblog | bRight & Early | Conservative Cat | Oblogatory Antidotes | Cao's Blog | Uncooperative Blogger | TMH Bacon Bits | Point Five |

This entry is in the following archive(s):
Analysis Of Changes Archive
BlogAds Archive

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Posted on Thu Dec 15, 2005 at 01:25 PM | Permalink | Email This | Blogroll IOA! |



Interesting stuff. Could be useful for a Ad sales guy like me.


Posted by: Gautam | December 19, 2005 05:21 AM

Interesting calculation but it seems to forget a rather simple issue: You actually have to SELL the ads. If you're averaging 1000 visits a week, you'll be lucky to sell a BlogAd for $10, let alone these figures.

I'm averaging 70,000 BlogAds visits a week most weeks and seldom get takers on my non-premium ads above $50 a week or $100 for the premium spots.

Posted by: James Joyner | December 23, 2005 11:50 PM

Yes, the ads still have to sell. My point above is that if you are making that much with AdSense or some other form of advertising then maybe your blog isn't suited to BlogAds.

In terms of revenue from a business point of view why would you accept a lower rate than you are already getting?

I've just found that I always sat there wondering what I should charge, so I decided to figure it out mathematically and put something together.

Posted by: Digger | December 24, 2005 03:27 AM

Since AdSense so tightly controls their pricing info, it's hard to compare. Are any politically oriented blogs consistently making big money from AdSense? I'm averaging maybe the price of a two week premium BlogAd sale a month for my AdSense strips.

Posted by: James Joyner | December 24, 2005 07:49 AM

I'm puzzled about ad pricing on sites. I don't see it explained properly anywere.

Example: a site with a Home Page which gets 100,000 hits/month; a subsidiary page gets 1,000 hits per month.

It makes sense that if you are pricing your ad per unit of time, you should price the subsidiary page at 1/100th of what you charge for the Home Page, since it gets 1/100th of the traffic, right?

So we are agreed?
1. Priced per time, the subsidiary page in my example should cost 1/100th of the Home Page
2. Priced by CPM, both should cost roughly the same

No! None of my rivals price their pages in this way.

They charge X% more per time unit on the Home Page (which makes sense, but see below), and more or less EXACTLY THE SAME X% more per CPM on the Home Page.

This seems crazy.

a. Their differential time-charging on the Home Page nowhere near reflects the VASTLY greater number of Home Page impressions.
b. Charging much more for a Home Page CPM seems irrational, since the Home Page is less targeted (agreed, however, that the Home Page could be considered more prestigious).

Why do they do this? Are they just misguided? Or is the media buyer misguided? Or is there something that isn't being caught by my logic?

Can you explain the logic of CPM versus per-time ad charging?

Posted by: Matthew Pollock | January 22, 2007 07:39 PM

Very useful info for bloggers like me trying to sell my blogspace and to find the right choice of fixing prices.

Posted by: hirfan khan | July 6, 2008 12:39 AM

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