How Do You Price Direct Ad Sales? Options

[Oliver George]

Direct ad sales are the contracts you take to display advertising for someone who contacts you directly. This is likely to generate the highest value ad campaigns you will run because they have specifically chosen your website as a good fit for their advertising based on your content and website visitors. But when you are getting started it's hard to decide what to charge.

A Bain/IAB study on online ad pricing found that the "average realized CPMs on ad networks ranged from $0.60-$1.10, versus $10-$20 in direct-sold display inventory". Based on this you might try and sell your direct ad sales at 10x your ad network eCPM.

We've commented on this in the past when Jason from UpToTen shared his method for pricing direct ad sales which boils down to "charge 5x your ad network eCPM".

Ultimately, pricing direct ad sales comes down to finding a price which advertisers are willing to pay.

How are you pricing your direct ad sales?

[Oliver George]

Quick follow up on this.

I expect that the more direct ad sales you run the lower your ad network eCPM. This might happen because you are using your higher value inventory for direct ad sales which leaves your less valuable inventory for ad networks to try and monetise.

Direct ad sales contracts may require targeting like:
- only show ads to one country (geo-targeting)
- don't show the ad more than 5 times to each visitor (frequency capping)

[kejsaren]

When deciding our prices last year we made a quick survey of what prices other big websites in our country (Sweden) had, and we found the average to be around 18 USD for 1 000 impressions (with some variations depending on market, size etc, of course).

[Oliver George]

When deciding our prices last year we made a quick survey of what prices other big websites in our country (Sweden) had, and we found the average to be around 18 USD for 1 000 impressions (with some variations depending on market, size etc, of course).

Thanks Kejsaren, that's a good approach.

I thought I'd link to a related blog post which shows how OpenX publishers package their direct ad sales. The surprise here was that 38% package in a tenancy arrangement where payment is based on displaying ads for a fixed period of time, regardless of the number of impressions.

http://blog.openx.org/08/how-do-you-price-...ad-space-sales/

[kejsaren]

How many replies did you get on the survey?


I am surprised that selling clicks is so unpopular, considering the popularity of Adwords, but as an adseller I can understand it cause even on very niched sites the CTR tends to be low (at least on our sites), and thus the prices for each click must be very high.

Can´t you make another survey on "How much do you charge per thousand pagewiews?" !

[Oliver George]

Hi Karta

Two thoughts on this.

People don't generally like to share their CPMs since it's competitive information, also CPM's vary dramatically based on the nature of your website. I think you technique for looking at the published direct ad sales CPM's is a very effective technique of estimating though.

I suspect that small publishers find charging on a tenancy arrangement simply easier to manage.

I'd love to hear some other opinions about this.

cheers, Oliver

[kejsaren]

"Karta" is me?

We were able to find surprisingly many price charts on our competitors, or just other companies, websites.

I think that tenancy is 1) easier to manage for the siteowner 2) more "familiar" for the advertisers ("what does impression mean anyway...")

Yes, the prices we found varied with 100% or more, depending on niche of site, kind of customer etc

We also used tenancy to start wtih, just because we didn´t have any ad management system at the time.
But then: how do you set prices for that? You divide time by amount of impressions

A survey would give anonymous replies....

[rrr]

I sell my ad inventory based on a fixed period of time, rather than impressions.

I've found that advertisers in my niche prefer the fixed time period because they are used to buying ads in "traditional" media like magazines/newspapers that follow the same "time based" format.

They may run an ad in a "6 issues" of a monthly magazine. That usually covers about 6 months of exposure, but the real "impressions" in traditional media is much harder to track than it is online, so the media seller's in those industry sell the overall "exposure" rather than the "impressions".

In my niche, that's who I'm competing with mostly. Not other website publishers, but magazine/newspaper publishers who get top dollar and deliver less impact.

I think that a well targeted website with the right audience can deliver a much better value than ads in a newspaper or magazine. It's much easier for a potential customer to take a direct action from a web ad than it is for an offline media ad where a person has to stop what they are doing and move to a computer or phone to take action.

So I price appropriately

[andrewt]

After we launched our site earlier this year, we quickly realized you can't charge a CPM. You have no track record. So we charged a flat fee or sponsor fee. There's a monthly rate, 6x and 12x rate (similar to the publishing world).

Before we set those rates, we researched other local sites and offline publishers so we could be positioned appropriately. It's worked well. No one has had any complaints (if anything we may not be charging enough).

We now have more than a dozen advertisers. We use display and text ads. And you are not just selling clicks but the impressions have a value too. Getting one's brand out there is important.

Also, we are very flexible (thanks to OpenX) with how we place our client's campaigns. For instance, if they want to buy a month but really want to promote different things for a week over the course of two months, then no problem. OpenX allows you to start/stop very easily.

[bff1]

On my forum I get £0.5 UK Sterling CPM on direct sales. I don't spend any time pursuing potential advertisers though. They can come to me.

[andrewt]

After we launched our site earlier this year, we quickly realized you can't charge a CPM. You have no track record. So we charged a flat fee or sponsor fee. There's a monthly rate, 6x and 12x rate (similar to the publishing world).

Before we set those rates, we researched other local sites and offline publishers so we could be positioned appropriately. It's worked well. No one has had any complaints (if anything we may not be charging enough).

We now have more than a dozen advertisers. We use display and text ads. And you are not just selling clicks but the impressions have a value too. Getting one's brand out there is important.

Also, we are very flexible (thanks to OpenX) with how we place our client's campaigns. For instance, if they want to buy a month but really want to promote different things for a week over the course of two months, then no problem. OpenX allows you to start/stop very easily.

UPDATE: Two and half years later and we continue to sell flat rates based on frequency (by month). Our average CPM is effectively $25-30. That's relatively high, but clients like our audience (targeted demographic in a specific location).

[jacob11]

read an interesting article in the New York Times a couple of days ago, and I want to share it with you. It seems that many large websites are creating their own ad “networks” to sell remnant space on their websites. Instead of the teeth whitening and belly flattening ads you are accustomed to seeing on large websites, you may actually begin to see some better targeted advertising.

The publishers are able to accomplish a few things when starting their own advertising networks. First, they are able to eliminate the middle man from their ad sales. Instead of paying an outside ad network to aggregate advertising, the websites are able to work directly with their advertisers.

Secondly, the publishers are able to offer more targeted (and more relevant) advertisements to their visitors. This should encourage higher click throughs and better conversion rates for advertisers. Again, this will help increase the CPM for publishers who find that advertisers are able to offer more money for their remnant positions.

Finally, publishers can keep all of the valuable consumer and visitor data that is usually taken by the advertising networks. This information is valuable for the publishers, and it prevents third party networks from doing funky things with it.

To me, the most surprising thing is that it seems that these publishers are just starting to do this. I am sure selling advertising across a huge network is a big challenge, but smaller websites (like this blog) have been successfully selling direct ads. I don’t have to generally worry about receiving payments and there’s no middle man to take a big cut.