Understanding Website Advertising Rates

Understanding website advertising rates is hard

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There is a nearly unlimited supply of advertising space on the internet. It is only limited by the number of ad impressions shown to people using the internet. The more people use the internet, the more ad space is available. Even though you might expect this to cause prices go to zero, website advertising rates are stable or increasing over time.

The Basics Of Website Advertising Rates

To understand how much it costs to buy advertising on the internet, you need to understand how it is sold. There are two main ways that most businesses pay for advertising online - CPM or CPC based rates. CPM stands for cost per thousand. CPC stands for cost per click. So, in CPM based ads, you pay per 1,000 ad impressions. In CPC based ads, you pay per click.

Advertising rates online are dictated by market competition and the place you are trying to advertise. For example, Facebook is a social network where not a lot of people are looking to purchase things. So, advertising on Facebook is cheap per impression or per click. The problem with that is if you are trying to sell things, it is a terrible place to advertise.

By comparison, Amazon is a place where people go to buy things, so advertising your product on Amazon will likely get you sales. Because it will get you sales, the price to advertise on Amazon is much higher.

How much should you pay?

When it comes to how much you should pay for advertising on a website, you need to consider how much it is going to cost vs how much it is going to make your business. Your goal should be to make every advertising dollar you spend be at least a break even advertising expense. So, when it’s all said and done, your business stays afloat. No business can afford to advertise unprofitably forever. That will put you out of business.

So, if you make $100 per sale and you have a $60 cost to create your product, you can spend up to $40 in advertising to make a sale. If you can do it in $20 per sale, you can advertise profitably forever. If you do it for $60 per sale, you are going to run out of money and go out of business.

NOTE: The above example is overly simplistic and ignores multiple purchases, customer lifetime value, and the more complicated metrics of running a business.

Once you know how much you can pay per sale, you need to purchase advertising according to your own metrics. In general, you can expect say a 1% conversion to sale rate on your website. So, if you have $40 per sale to spend, and you convert at 1%, you can afford to spend $0.40 per click to break even. ($40 x 1% = $0.40)

If you are buying on a CPM basis, you will need to know what the click through rate is on your ad to be able to figure out the appropriate CPM. If you get a 1% click through rate, then you can spend up to $4 CPM. (1000 x 1% x $0.40 = $4)

All the above numbers are made up, and they will be different for each business. You need to do the math on your business’s costs, revenue, and budget to understand how much you can afford to spend. Do this before you start buying advertising on websites.

Where To Buy Ads

There are so many places to buy advertising on a website, that it can be pretty daunting to get started. The top places I would start are Google AdWords, Bing Ads, and Amazon Product Ads. What is great about those three platforms is you can get your feet wet without a huge ad spend. If you do it right, you should be able to spend $100 or less to get started and maybe get your first sale or lead.

With Google AdWords, you are purchasing keyword based advertising on a cost per click basis. The rates are going to vary on a per keyword basis. For example, the bid price on the keyword “cheese shredder” is going to be different than “used iphone cases”.

One thing to understand about AdWords is you can bid on just the search network or what they call the content network. The content network is the AdSense ads placed on millions of websites throughout the internet. If you bid on “cheese shredder” on the content network, your ad could show up on the thousands of pages online about cheese shredders.

Bing Ads works almost the same as Google AdWords, but it is for the Bing and Yahoo search engines. Bing Ads has their own similar contextual advertising network of websites through Media.net. In general, the cost to advertise on bing is much lower than on Google AdWords. This is because there are fewer advertisers competing for ad space. Thus, the bids are lower per click.

Amazon Ads is the third best option. It is set there on this list because it is only a great option if you are selling a physical or digital product. For example, if you are selling a cheese shredder, advertising your product alongside other cheese shredders on Amazon is a good idea. If you are selling a lawn care service, advertising on Amazon doesn’t make a whole lot of sense. As with Bing Ads and AdWords, you should start small and find something that works before throwing a lot of money at Amazon Ads.

Other Ways To Buy Website Advertising

If you go to a website that has ads on it, it is possible for you to buy ad placement. But, you should be cautious before venturing beyond the large marketplaces. You need to have your metrics in order and you need to understand how to profitably advertise your business. Otherwise, you are throwing money away. Once you have a good system in place for advertising your business online at a profit, you might look at these other advertising networks:

There are hundreds of other ad networks out there and it doesn’t make sense for you to try them all. Instead, we recommend you start with the bigger networks and work your way down as you figure out what works for your business. Like any form of advertising, not every advertising channel is the same. You have to experiment and see what works for you.

We also have our own little ad network here at Growlight Network and are willing to discuss how we could help your business grow. Our rates are fair and we won’t place an ad that we think is a dud. If you are interested in buying ads on our network, just fill out the contact form and we will be in touch soon.

Want to make more money with your website? Growlight Network can help!