Forums: Discussions for entrepreneurs and small business.

I am considering starting a business that would compete directly with a well established, successful website. This website charges their customers a premium for their service. I am curious about the idea of offering the same service for free and making money through advertising instead. How can I figure out how much I can make through advertising? I’m only vaguely familiar with online advertising. Is there a way to simply equate the number of daily visitors to the site with advertising revenue?  Thanks in advance.

 

• "impressions" = number of ads you serve to your audience
• "ads per page" = average number of ads you serve on a single (appropriate) page
• "visitors" = total number of visits to your site in a time period, usually measured monthly
• "unique visitors" = total number of visitors to your site in a time period, usually monthly
• "page views" = number of pages seen by your visitors
• "display ad sizes" = sizes of ads you provide to advertisers. on our site it`s mostly "300x250 island ads" and "160x600 skyscrapers"
• "CPM-based ads" = you charge advertisers on a Cost Per Thousand basis. These rates can vary widely from $.30 to $30. Totally depends on nature and value of your site, audience and advertisers

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Rich Sloan , Co-Founder, Chief Startupologist, StartupNation

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You can definitely make money through ad revenue. You`re going to make the most if you
1. Have a very targeted audience.
2. Have a very large audience.

As far as how much you`ll make, it depends on what the demand is like for your target audience and how you sell the ad space. There are lots of systems to sell the space for you (Adsense, Federated Media, Adbrite, Project Wonderful, etc) or you can simply sell the space on your own and not pay a commission to a network (it will be more work on your part to sell the space to the advertisers).  Can you tell us more about what the site will be like and who the target audience will be?



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I agree with DKing.  I think affiliate programs are better than selling Website space.  To sell Website space you would have to get TONS of traffic to the site.  People will only pay if they can get A LOT of targeted hits from your site.
So, I would say to still offer your service for free, but use the advertising space for affiliate links instead of selling it.  And, be sure the affiliate links are related to your product/service in some way.

Here is a way to calculate advertising when using PPC (pay-per-click), with affiliate programs:

When starting a new campaign you need to calculate how much you will earn for a single commission for the product you are promoting.  Once calculated, you will have a threshold to follow.  Once traffic starts coming to your site you need to look at your Adwords campaign data.  More importantly, look at the cost of your campaign.  Once your cost exceeds the single commission amount, you should put your campaign on pause and look further into things.

For example, if you make $45 per sale in commissions, the maximum you should spend on the campaign without a sale is $45 before making changes.

What do I mean by "Looking further into things"?  You can look at your advertising campaign and see how much you have spent on a campaign.  Look at the average cost-per-click, average position and traffic per keyword.  You may see that one keyword has triggered all of the hits to your site.  In this case you may want to lower the bid for this keyword or even delete it all together. 
Traffic is great, but if it does not convert into sales you need to make some adjustments to your Ad Group and/or site.  Following the single commission threshold above is a good way to test your campaigns at the beginning.



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Amir Khan - http://www.mysmallbiztips.com | Free Small Business Blog and Resource

Thanks for the replies so far.  I do have some questions based on the responses thus far.  What I would like to do is be able to accurately estimate my potential advertising revenue.  In order to achieve this I need to define how many visitors, unique visitors and page views would be necessary to meet my financial goals. 

1. Is there any way to accurately determine a website`s traffic in terms of visitors, unique visitors and page views?  This is my biggest hurdle at the moment.  Unless I am reading the data incorrectly Alexa seems to be a good tool for giving a ranking, but not for the specific data I am looking for.

2. Assuming I can figure out what my target numbers are, how likely is it that I can sell enough advertising to hit my financial goals?  Lets say I am receiving 100,000 page views a month and my website deals with information targeted to small business owners.  With numbers like that and a large focus group will there be enough interest to sell out my potential ad spaces if I have 2 ads per page?

3. What is the best way to sell advertising?  Startup Nation appears to sell its own ad space.  As exgeek mentioned above, there are companies such as Federated Media that sell ads.  What I couldn`t find on the Federated site (or any others) was what sort of commission they take.  Does anyone know what kind of a cut these companies take?

I would like to put together a business plan.  I have a couple ideas swirling around.  The initial idea I had when I started this thread may not come to fruition but I have other information based website ideas that would center around an advertising model.  Any additional information that might be helpful in writing a business plan with a advertising model would be much appreciated.  Thank you in advance.

I just finished a couple articles in recent blog posts about this topic. This needs to be a data based approach. It's based on keyword studies. The information is out there to find out how many searches are done on particular keywords each day. From that you can calculate a reasonable expection in the amount of traffic you will see.

Calculate Traffic

From there, you would need to know (and can find out in advance) what the revenue from a click would be and use common factors on average click through rates to find out what your expected advertising revenue could be.

Adsense Revenue Expectation

Your making the right move thinking through this in advance. I put 100's of hours into a site only to find out that the total market was roughly 20 searches per day for the keyword for which the site was optimized, and the total income expectation was about 40 cents per day, as ads in that niche were ballpark 5 to 10 cents per click.

Hope this is of service.

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I will be brief...

basing your business plan on advertising is not a good idea. revenue from ads in the net is around $1 per 1k unique visitors.

instead, try to come up with a more strategic plan.

PM me if you want further assistance.

cya

I don't think you should rely 100% upon the income of the adverisements o your site. You can't be sure how much you would get. Secondly, it will get time to gain high PR. YOu can compete with lower rates, better services.

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I read all the comments posted here and i am convinced that the we should use those values to calculate the advertisement revenue. Said that, we have developed a free website to provide the exact same service to estimate advertising revenue for your website, this is done mainly using your site visitor traffic data available publicly. We also use many source and data to calculate the estimated website worth and possible ad revenue for monthly and daily. Please take a look at our service http://www.freewebsitereport.org

www.freewebsitereport.org