Calculating profit, confused about CPM

Confused how much money a site can make from CPM

[asauterChicago]

Ok, I'm new at this, and I'm totally confused about how much money one could make from banner, skyscrapers, etc...

Say I have 6.5 million unique vistors a month coming to my site. I want to sell my own advertising, so I want to have two spots on my site to have my sales to team sell: banner, and a skyscraper. Say I can command a CPM of $10.00. I want to rotate a total of 5 advertisers through my site daily.

How does that calculate? What I can make daily/monthly? I'm confused how that works. Does that mean, each advertiser pays the CPM of $10.00 so a daily rate of ($4,300 for the two spots * 5) or can I only sell upto $4,300 a day. I can't seem to find much information on this and I have been running in circles for about 2 hours now.

Thanks,

Andy

[ccDan]

I'm confused how that works. Does that mean, each advertiser pays the CPM of $10.00 so a daily rate of ($4,300 for the two spots * 5) or can I only sell upto $4,300 a day.

You're rotating ads, 5 ads in the banner position and 5 ads in the skyscraper position, right?

So, each advertiser's ad will only appear 1/5 of the time, unless they purchase an ad in each position, which would mean they would have an ad appearing 2/5 of the time.

Now, why would advertisers want to pay for the 4/5 (or 3/5) of the time that their ads are not being shown?

[tvmatt]

If you're charging $10 CPM per spot, that means the advertisers pay you $10 for every 1000 times their ad is shown. 6.5 mil impressions @ $10/thousand will get you $65,000 per ad spot per month. Since you have two ad spots, that will be an estimated $4,300 per day like you said. You don't have to worry about selling it on a daily basis (for example, limiting your sales team to only sell $4300/day) because the advertisers are paying per thousand, not per day.

If you're new to this stuff, I'd recommend going with an ad agency to run your space, or at least talking to a firm specializing in online advertising on a consulting basis.

[markwelch]

Be careful with your numbers -- depending on the topic and format of your website, and the nature of your visitors and their activity at your site, you are quite likely to find that much or most of your traffic will not generate anything near $10 CPM.

Indeed, many highly-respected web sites that claim to charge $10 CPM for their advertising are actually earning an average of $1 CPM or less for their pageviews (including however many ad slots they use). I know of sites that have total revenue that is less than $1 CPM (that is, less than one dollar per 1,000 pageviews).

Some types of sites -- like most discussion forums -- have trouble getting and keeping advertisers because visitors are focused on the content in the discussion forums and "tune out" the advertising, so that clickthrough rates are below 0.1% (e.g. fewer than one visitor in 1,000 clicks the ad).

If you utilize a broker or ad network, they will also take a "cut" (generally 20% to 50%).

Keep in mind that there is a huge difference between "booking revenue" (selling the advertising and getting a promise of payment) and actually collecting payment -- the advertising industry is famous for late-pay and no-pay.

For some sites, you might be able to earn more from an "affiliate" relationship (pay per sale) than from a pure CPM-based advertising relationship. There are also other types of advertising, including pay-per-click and pay-per-lead.

Most successful web publishers "mix and match" a variety of advertising strategies to optimize revenue.