The Cost of Online Advertising

Advertising pricing is where online advertising really gets interesting.

There are three distinct categories of online advertising:

  1. Search and directories … such as PPC (Pay Per Click) key word buys  on Google
  2. Display advertising (our company specialty) … such as banner and video ads
  3. Classified advertising … such as real estate sites

Pricing models vary but the most common are:

Online Advertising CostsSearch such as Google’s auction which determines a pay per click rate based on how popular or generic a search term is – with something like “home loans” being very popular and therefore expensive. With this rate you need to monitor very closely whether you are paying too much for the position you have been given or whether or not you are paying too little and your placement is so low you are not getting many clicks. Keyword rates vary from $0.10 c to as high as $7-8 for some keywords !

Display advertising charges mostly on a cost per thousand basis (CPM ) … per thousand page impressions that is. The cost to advertise on a site or group of sites is largely determined by the following factors:

The number of page impressions (or traffic) a site or group of sites achieve on average in a month or a week, for example.

The number of Unique Browsers (approximate visitors) per month

The category the site falls into – eg Travel, Finance , or Social Networking to name 3 for example. (Finance & Business sites are often highly in demand as their audience base is highly sought after by advertisers, yet the supply of inventory is somewhat limited in comparison to sites in other verticals such as Social Networking or Entertainment.)

The size of the ad unit, whether a 300 x 250, 728 x 90 ,  160 x 600 or Pre Roll Video

On what part of the site the ad unit is placed … that is a Home Page ad will attract a higher CPM than an ad on  a Forums or Photogallery  page for eg..

Interestingly, as website inventory has grown dramatically in recent years, the cost for display advertising has correspondingly gone down.

Cost Per Click is where an advertiser pays each time a user clicks on a banner advertisement or link. This model is gradually  being replaced by Performance based Cost Per Action (CPA)  advertising which is a relatively  new but rapidly growing model where an advertiser pays only when a product or service is purchased as a result of a user clicking on that ad or link .

Basically if something is purchased from an ad, the website or representation firm gets a commission from the advertiser. Performance Advertising has brought mid sized and SMEs into display advertising as the price for key terms in search is going up. Al though often the advertiser has little say in where their ad is placed on a site or group of sites … the flipside of course is that the advertiser only pays when their product or service is purchased.

So where do you go …

For Search advertising you can go direct to Google or to a specialist Search Marketing agency. For smaller advertisers (spending less than $5000 per month), I would suggest going direct to Google for greatest value, though the onus ( & challenge )will be on you to manage your keyword buys price efficiently .

For brand awareness and tactical display advertising at an affordable price and cost per action advertising, site representation firms and broader based ad networks are usually the best place to start.

Andrew Lockwood is MD of News, Business and Finance website representation firm PostClick.

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