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CPM (Cost Per Thousand)

CPM stands for cost per mille (the French word for “thousand”). Though often confused by those not familiar with the ad industry as cost per million, this metric actually refers to the all-in cost for an advertiser to run 1,000 impressions of an individual ad unit.

For example, a $5 CPM associated with a 728×90 leaderboard means that the advertiser would pay $5 for every 1,000 of those ad units served. If an IO ordered 100,000 ad units the total cost would be $500.

This pricing model is also sometimes known ad cost per impression, since the advertiser pays for each ad served, not per a specific result (i.e. a sale, registration, opt-in).

CPM vs RPM

It’s critical to understand the difference between CPM (cost per mille) and RPM (revenue per mille). The differences are pretty obvious but it’s an important thing to keep in mind.

  • CPM – The cost of purchasing a thousand ad impressions.
  • RPM – The revenue generated from serving a thousand ad impressions.

In some cases, these numbers will be the same. More often than not, there are big gaps between these two figures and there are a myriad of reasons why this might be.

The most common reason for this is an ad network. If a publisher decides to use an ad network instead of working with an advertiser directly, the network will take their cut (often a big one). The advertiser may pay a CPM of $5 and the publishers RPM may well be $1.5.

Monetizing via Display Advertising

The cost per impression (aka CPM) pricing model is most often used in display advertising. If this is something you’ve got an interest in, we have a lot of resources on it.

I would recommend starting off by reading our Ultimate Guide to Display Advertising as well as our in-depth ad network reviews.

Display Advertising

This term simply refers to web-based ad campaigns. Display ads are the advertisements that you see on almost every webpage you visit, most commonly in the form of 728×90 leaderboards or 300×250 rectangles.

Selling Display Ads

Display ads can be bought and sold in three primary ways:

  • Through a network or exchange (such as AdSense)
  • Through a marketplace (such as BuySellAds)
  • Directly through sales team

Most sites that monetize their traffic through display advertising will utilize the first method above. As of 2013, Google AdSense alone includes two million publishers who earned $7 billion annually in revenue. Larger sites, however, will often employ a direct sales team responsible for selling ads.

Forms of Display Ads

In recent years the number of display ad formats has increased significantly. While the standard units that make the Universal Ad Package still account for a large percentage of total impressions, there are many more high impact ad units now available. The links below to the IAB site as well as the rich media gallery have numerous examples of the ad units now available to both advertisers and publishers.

Examples of Display Ad FormatsPricing Display Ads

There are two primary ways that publishers are compensated for running display ads:

  1. Cost per Impression (CPM): Under this model, advertisers pay for every impression of theirs that is served.
  2. Cost per Click (CPC): Under this model, publishers get paid whenever a visitor to their site clicks on an ad. Most ad networks and exchanges operate under CPC pricing arrangements.

In some cases, display ads will be priced on a cost per action or CPA basis. However, this is more common under affiliate marketing models.

Display advertising is the most common monetization strategy for web publishers, and for good reason.

Display advertising is extremely easy to activate; with dozens of ad networks available, even small publishers can be up and running with a minimal amount of work. There is also typically an unlimited supply of advertisements available; if you’re able to attract the visitors, display advertising presents an opportunity to monetize them.

Another advantage is the stability of earnings. Even under CPC arrangements, display ad revenue tends to be very stable from week to week for most sites. Moreover, display advertising is generally compatible with other monetization strategies.

The primary disadvantage of display advertising relates to the relatively low payouts. Many publishers will generate only a few dollars (if they’re lucky) for every thousand pageviews they are able to generate. For many, that means that millions of monthly views are required in order to have any meaningful amount of revenue.

As noted above, AdSense paid out $7 billion to about two million publishers in 2012. That seems like a tremendous amount of money, but it actually only translates to about $3,500 per publisher for the entire year. In other words, most sites being monetized through display ads have very limited success.

Sponsored Tweets

Sponsored Tweets are both new and rare, but there are a handful of sites and individuals who have started to monetize their social media followings by effectively advertising products and services on the platform. Twitter users who have a large number of engaged followers may be able to deliver advertisers by discussing their products on this platform.

Examples of Sponsored Tweets

Below is a tweet from The Onion linking to a sponsored article from Burger King on their site. Note that the tweet is clearly identified as sponsored (more on this below).

Example of a Sponsored Tweet from The Onion

In this example above, the sponsored tweet is likely part of a larger package that includes the advertiser’s creative on the page to which this tweet links.

There are a number of other examples of sponsored tweets available through a quick Twitter search of the #sponsored hashtag:

Sponsored Tweets on Twitter

Laws and Regulations

The Federal Communications Commission (FCC) has in recent years come up with a set of guidelines for disclosures required from sponsored tweets. Links to more detailed discussions of these rules are included below, but in essence the law requires that tweets be identified as sponsored when they are made. The most common way of doing this (as shown in the example above) is with the #sponsored hashtag.

Twitter has said that sponsored tweets like those shown above are acceptable as long as they are “manually posted or approved” and “as long as it’s not spammy. “

How to Sell Sponsored Tweets

Similar to ad sales, the ideal approach for selling sponsored tweets involves a direct relationship with a relevant advertiser. More common, however, is the use of networks that match up buyers and sellers. There are a number of networks focusing specifically on selling sponsored tweets:

Below is a table highlighting a few of the price points at which SponsoredTweets.com offers advertisers an opportunity to “rent” out the followers of a few celebrities:

User Followers Cost Per 1000 Followers
@khloekardashian 8.7M $13,000 $1.47
@snooki 6.8M $7,800 $1.16
@daddy_yankee 6.5M $3,250 $0.50
@MikeTyson 4.3M $6,500 $1.52
@Zendaya 4.0M $1,950 $0.49

If you’re thinking about monetizing your Twitter account by offering sponsored posts, there are a few things to keep in mind.

The most important item to consider is the limited revenue opportunity. As shown in many of the sponsored tweet marketplaces, the payment per follower is minimal. That means that you really need to have a massive following in order to generate a meaningful amount of revenue from sponsored tweets. In many cases, it won’t be worth the hassle of setting up–especially if you start losing followers as a result.

As shown above, even celebrities command in the range of $0.50 to $1.50 per 1,000 followers for making sponsored tweets. That represents the gross payment, before the network takes a piece. So if you have a few thousand followers, your revenue potential is extremely limited.

A better strategy for monetizing Twitter followers is an indirect one. Use your feed to promote more relevant pieces of content that can make money for you. If you monetize via display ads, focus on a strategy that will increase referrals from Twitter. If you have a paid membership product, look into running sales or coupons via Twitter.

Tracking Pixel

A tracking pixel refers to a file or code that allows advertisers or agencies to track the number of impressions recorded on a certain ad unit. A tracking pixel is typically used when the advertiser is unable to deliver third party tags that will render the ads (when third party tags are used, the advertiser is able to track each impression via their ad platform).

The goal of a tracking pixel is for the advertiser to have an accurate count of the number of impressions that have been served. This information is most commonly used to evaluate the success of that ad (for example, in calculating the click-thru rate). The tracking pixel name comes from the fact that this is often accomplished by embedding a 1 pixel wide by 1 pixel tall image into the ad. This pixel is not noticeable by most visitors, but allows for advertisers to track each time it is displayed.

For example, if a publisher requires that a certain ad be delivered as a static JPEG file, the advertiser may wish to include a tracking pixel that will register each ad impression. This tracking pixel may be delivered as either a line of code or an image.

Third Party URL

In many cases, a more effective way to accomplish the same goal will be to utilize a third party tracking URL. Many ad servers, including DFP, allow publishers to specify a URL that will be “pinged” every time an ad impression is served. This generally allows advertisers to have an accurate view of the number of times an ad has been viewed, and accomplishes the same goal as a proper tracking pixel implemented into an ad.

Below is the screen in DFP where this URL is activated:

Example of a Third Party URL

For many publishers, this will be a more practical way of accomplishing what a tracking pixel would do. Each time an ad impression is served, a URL the advertiser specifies will be pinged so that they have an accurate count. If the advertiser is also tracking the number of visitors coming from that ad, they will be able to compute an accurate click-thru rate and evaluate the performance of the ad unit.

Portrait

This “Rising Star” display ad unit is the same width as the more common 300×250 medium rectangle, but more than four times as tall as the IAB standard unit. The result is an ad unit that extends below-the-fold on most computer displays:

Example of a Portrait Ad Unit

The portrait ad unit is appealing to many advertisers because thee large size allows for the incorporation of multiple messages in different sections. In many cases, the portrait will almost appear to consist of multiple different ad units (as in the example above). The portrait ad is also commonly used along with rich media to incorporate interactive features (the example above has a user-initiated video in the bottom third of the ad).

Policies & Pricing

If you are interested in offering this ad unit, we suggest implementing it in a way that allows for the flexibility to be rotated in alongside other ad units. For example, structure the ad units on your right rail such that a 300×250 medium rectangle, 300×600 large rectangle, or 300×1050 portrait can be served in the same position (if one of the larger units is served, any content below the ad unit would simply be pushed lower).

StyleList, the example used above, does just this with its right rail ad positions. Below is an example of a 300×600 rotated in to the same position that can also be used by a portrait ad:

Example of a Flexible Ad Unit

Pricing a 300×1050 ad unit can seem a bit challenging, especially for smaller publishers.

However, this is actually a pretty straightforward process in our opinion. It is reasonable for this ad unit to cost 3x or 4x what would be charged for a standard rectangle (which equates to the increase in size). In addition to the extra space afforded, advertisers realize value in the form of the non-standard size of the unit (which helps to combat banner blindness) and the leveraging of the publisher brand that occurs when ad ad occupies such a significant amount of space on a page.

Alternatively, a portrait can be priced similar to a smaller ad unit (e.g., the same price as a 300×250 rectangle) if it is being effectively used as a value add for an advertiser. In this strategy, however, it is important to make it clear to the advertiser that they are receiving a substantial discount and added value in the form of additional ad square footage.

 

Email Monetization

Just like pageviews on a website, email impressions can be monetized in a number of different ways. Though most sites that collect email addresses use them primarily for non-commercial purposes, it is possible to also introduce some revenue-generating activities as well.

Email monetization is attractive to many publishers because it typically represents an opportunity to generate purely incremental revenue. In other words, revenue opportunities related to email don’t require any audience growth and won’t cannibalize existing revenue streams.

Common Email Monetization

There are several ways to generate revenue from email addresses. These include:

  • Dedicated Emails: This strategy, also known as a list rental, involves sending an email created by a third party advertiser to your subscribers.
  • Co-registration: This process involves inviting visitors to opt-in to third party newsletters and memberships after they complete their registration to your email-based product.
  • Email Banner Ads: It is possible to insert banner ads directly into emails, typically through either a direct sale of a CPC-based network. Whenever subscribers click on an email in an ad, the publisher generates revenue.
  • “Indirect” Monetization: Many sites collecting email addresses are engaged in some form of indirect monetization. This general concept refers to using email to drive other revenue streams (for example, driving traffic to your site where display ads are served or emailing promotional offers for a paid membership).

Much like with standard display ads, the easiest way to begin monetizing email is to utilize a third party network that can fill inventory immediately. However, an ideal long term strategy involves selling directly to advertisers. With more and more advertisers are now looking for creative ways to reach potential clients, email advertising options may be appealing.

If you have a media kit, update it to highlight the opportunities available to advertisers to reach your audience through email as well.

While email can represent a major monetization opportunity, there can also be some substantial risks:

  • Banned by ESP: If your emails become more commercial in nature, you will likely see unsubscribe rates and spam complaints go up (even if you meet all requirements laid out). If these rates get too high, you could be kicked off your email provider’s platform.
  • Legal Requirements: Whenever you use email to communicate with your audience, there are potential legal issues that can arise. It’s important to ensure that you comply with laws surrounding email even if you aren’t making a penny off of it; failure to offer an “unsubscribe” option can end up costing you thousands in fines.
  • Loss of Subs: If you use email already to communicate with your audience, turning on monetization will likely cause some subscribers to opt-out of your product (some folks are really turned off by even the slightest scent of commercial activity).

Pay Wall

This term is relevant for sites that monetize their traffic by selling paid membership products. A paid wall prevents visitors from accessing certain content or pages if they have not paid for a certain membership level, often prompting them to sign up.

Any site that has multiple membership levels will contain pay walls designed to keep non-members out and funnel them towards a membership or trial. Below is an example of a pay wall in action:

Example of a Pay Wall

This page appears when a visitor is trying to access a page that requires a different level of membership. As is often the case, this example prompts visitors to either log in or sign up for the required membership.

Pay Wall Logistics

When putting up a pay wall, the biggest decision that will be made relates to how much content to allow to be seen by non-members. In the example above, WSJ.com allows for only a very small preview; non-members are able only to read the first couple of lines.

Some sites will allow for a limited number of whole page views (more on this below) or a larger percentage of the page to be displayed as a “preview” of the membership benefits. Typically some form of compromise will fork best here; a pay wall should allow potential members to see some of the premium content, but not so much that there is no incentive to create a membership.

For more on this concept, see our entry on Freemium.

Free Walls

In some cases, the lines between free and paid walls begin to blur a bit. Below is a page from the Harvard Business Review highlighting multiple membership tiers. As shown, free members can access a limited number of pages before they have to begin paying:

Pay Wall Example on HBR.org

In this example, there are two “walls” that a regular visitor will encounter. First, the free wall will require them to register and provide certain information in order to access the first four articles.

Once HBR.org has determined that a visitor has viewed four articles, they’ll present another pay wall that requires a paid membership to keep reading.

Pay Wall Platforms

There are a number of open source solutions available to manage member information and insert or remove pay walls as appropriate, including aMember.

Shopping Cart Abandonment

This term is primarily relevant to sites that monetize by selling physical goods or memberships. Shopping cart abandonment occurs when a visitor fails to complete the checkout process, meaning that the site owner misses out on potential revenue.

Though it is a remnant of brick-and-mortar retail outlets, the term “shopping cart” has also come to be associated with the non-physical location where online shoppers gather goods they intend to buy. Almost every site that allows the purchase of physical goods utilizes some variation of the “shopping cart” term:

Example of an Online Shopping Cart

Most studies indicate that shopping cart abandonment rates are extremely high, meaning that it is fairly common for online shoppers to take the first step towards completing a transaction but ultimately give up before the process is complete. There are a number of best practices that can be put in place to combat shopping cart abandonment and increase conversion rate, which ultimately leads to more revenue.

Based on a study by the Baymard Institute, the industry-wide shopping cart abandonment rate is approximately 68%.

Abandonment Solutions

Reducing shopping cart abandonment can result in a meaningful increase in revenue for sites that sell physical or digital products. There are a number of strategies that can be employed to do this, including:

  • “Remarketing” to known shoppers with targeted ads
  • Offering coupons
  • Streamlining checkout process

There are a number of ways to implement each of the above, especially the third bullet point. Often, the easiest way to reduce shopping cart abandonment involves eliminating frustrations and roadblocks from the actual checkout process. This can include:

  • Reducing the number of fields required
  • Reducing the number of pageloads between item selection and payment processing
  • Maximize number of payment options (including PayPal, Bitcoin, and others)

Heat Map

A heat map is used to provide a visual representation of how visitors are interacting with a website. The infotmation conveyed in heat maps can be used in a number of different ways, including:

  • Impacting layout of a site
  • Changing design to highlight key sections / links
  • Varying display ad strategies to promote higher clicks or interaction

In many cases, a heatmap will be used in connection with split testing in order to evaluate how users interact with slightly different variations of a Web page.

Types of Heatmaps

A heatmap generally shows one of two things: where visitors are focusing their view or where visitors are clicking. The former is much harder to determine; it requires some advanced technology and at least a semi-formal experiment. Below is an example of what a heatmap of visual focus might look like:

Example of a Visual Heatmap

This image represents the sections of a website that receive the most focus from visitors. The pattern above is relatively common; visitors tend to focus most intently on content positioned in the top left of a page, with attention waning as they more down the page and to the right.

This type of heatmap will give important cues about what sections of a site naturally draw attention. This may be useful in positioning high value links or calls-to-action within these “hot zones.”

Heat maps may also show click activity:

Example of a Click Heat Map

This information is also extremely useful; it shows what sections of a site are compelling enough for visitors to click on them. This indicates what is capturing attention, and can give ideas for future split tests, redesigns, or revisions to existing copy on a site.

AdSense Heat Map

Heat maps can be either customized to a specific site or page (using services such as CrazyEgg) or more general in nature. For example, Google published a heatmap detailing the areas of a generic website that capture the majority of visitor attention:

Example of a Generic Heatmap

This heatmap is a great resource for any site monetizing via display ads; though simple, it incorporates the guiding principles that will help publishers to maximize revenue in the long term.

There are a number of high quality heatmap platforms, the best known of which is Crazy Egg.

If you’re looking for something that is easy to set up and maintain, this is probably the way to go.

It’s worth noting that Google Analytics now includes intermediate heatmap functionality. For example, it’s possible to get a visual representation of the outbound clicks from a page:

Analytics Heatmap

The example above is obviously free (it’s a part of Analytics, accessible through Behavior >> In-Page Analytics)

Cost Per Lead (CPL)

This term is associated with lead generation, a monetization technique that is used by a relatively small portion of sites but that has the potential to be very lucrative. Lead generation involves collecting contact information about a visitor likely to be interested in a specific product or service and selling that information either to a lead aggregator or directly to a company selling those products.

For example, Insurance.com operates as a lead generation site; it captures information such as name and phone number from visitors interested in auto insurance policies, and sells that information to agencies able to write those policies.

Example of a CPL-Based Site

Under a CPL pricing model, the buyer of leads will pay a certain amount to partners for every qualified lead they are able to generate. Qualified leads refer to those that meet certain minimum standards that the buyer deems to indicate a worthwhile potential customer; non-qualified leads are generally removed during the lead scrubbing process.

Pricing Models 101

CPL is a relatively rare model for compensating site owners. Others more commonly used models include:

  • Cost per Impression (CPM): Advertisers pay for every impression shown.
  • Cost per Click CPC: Advertisers pay every time a visitor clicks an ad.
  • Cost per Action (CPA): Advertisers pay every time a visitor clicks an ad and then completes an action (such as creating a membership or completing a purchase.

The lines between CPL and CPA pricing models can blur in some cases when the specified action involves a referred visitor creating a membership or filling out a form that includes contact information. In fact, many affiliate marketers will list their programs with the amount of money paid “per lead.”

Example of Revenue per Lead Advertiser

Co-Registration CPL Models

Another example of a CPL pricing model is co-registration. This process involves presenting offers to visitors who have just completed some sort of signup process, and giving them the option to also register for these services. When they opt in, the contact information (often at least an email address and sometimes also a phone number or name) is passed to the advertiser. This contact information is a lead, and the publisher running the co-registration offers receives money every time this information is passed.

Below is an example of a co-registration form:

Example of CPL Pricing: Co-Reg on Time Inc Properties

For each of these boxes that is checked, the contact information (which was collected in the previous step) is passed on to the newsletter provider. For each lead collected, the publisher and network split revenue.

Test Campaign

A test campaign is a type of display ad campaign that effectively allows advertisers to try out a site for consideration in upcoming initiatives. If a publisher performs well during a test campaign, they will generally be invited to submit larger proposals for more traditional campaigns.

Test Campaign Strategies

Some sales reps or publishers may elect to offer an advertiser the ability to run a test campaign from time-to-time. This offer typically makes sense if:

  1. The publisher is confident that their site would perform very well for a specific advertiser.
  2. The advertiser has been hesitant to include a specific publisher on a campaign.

Generally, a test campaign involves some sort of exception being made by the publisher. For example, the minimum spend amount may be waived in order to allow an advertiser to run a campaign at a lower price point. The publisher may also make significant concessions on the rates normally charged in order to reduce the advertiser risk.

Some publishers may elect to present the opportunity to run a test campaign at zero cost to the advertiser. Again, this strategy only makes sense if you are very confident in the ability of your site to deliver value but are struggling to convince the advertiser to give you a shot. Giving away valuable inventory for free is only worthwhile if you expect the same advertiser to pay for additional inventory in the future.

It’s important to make it clear that the discounted or bonus media pricing is applicable to the test campaign only.

Test Campaign Basics

Though all advertisers and sites vary, some rules of thumb for test campaigns include:

  • Budget of $1,000 to $5,000
  • Typically one month in length
  • One or two line items / creative sizes

Though advertisers will occasionally request a test campaign, it is often a technique employed by publishers looking to attract new customers.

Test campaigns can be relatively unsolicited, meaning that it may make sense to send an advertiser a detailed proposal for the “bargain” campaign you are willing to offer them. This could look something like the following:

Example of a Test Campaign Proposal

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Super Leaderboard

The super leaderboard is a relatively new ad unit that has been introduced as an alternative to the traditional 728×90 leaderboard that is a component of the Universal Ad Package. This leaderboard is slightly wider than the standard leaderboard (click to see actual size):

SIde by Side Comparison of Leaderboard and Super Leaderboard

The larger size of the super leaderboard allows advertisers to fit additional messaging within their ad. The non-traditional size of this ad unit may also be effective in combating banner blindness among visitors who are used to seeing smaller ads.

Sites with designs that include padding around a traditional 728×90 leaderboard (121 pixels minimum on either side) should be able to enable that position to serve ads of either size. For example, the page below from The Wall Street Journal could easily render either a standard 728×90 leaderboard or a wider super leaderboard that is 970 pixels wide:

Example of Leaderboard Ad Flexibility

Variations of Super Leaderboard

Some sites also offer a 970×66 super leaderboard, which is slightly shorter than the more common version. In many cases, this shorter super leaderboard is also implemented as an expandable ad. Below is an example of this in action on CNET:

Example of a 970x66 Super Leaderboard

Like other ad units, super leaderboards can be made to expand either automatically or on a user click. Below is an example of a 970×66 super leaderboard that expands downward to a much larger size:

Example of Expandable Super Leaderboard

The super leaderboard ad unit has a lot of potential, but limited effectiveness at present.

Because many advertisers continue to prefer the more widely used 728×90 size, there is limited advertiser demand for the larger ad unit at present. That means that if you’re using a CPC ad network such as Google AdSense, inserting a 970×90 ad is probably not a good idea. Because relatively few advertisers have a 970×90 ad unit, it may be difficult for the ad network to find ads that are relevant to your content and audience. That leads to a lower click rate and lower earnings.

However, as noted above, it is possible to set ad units to accept creatives of multiple sizes. So, for example, if there is sufficient room an ad unit could be set to accept either a 728×90 or a 970×90 leaderboard. That gives the ad network even more flexibility; it will likely serve up primarily 728×90 leaderboards (since there are more ads to choose from) but will work in a super leaderboard when it is expected to generate higher revenue.

If more advertisers begin creating 970×90 ad units, this may eventually be an opportunity to generate some incremental revenue above traditional leaderboards.

Direct Response

Direct response is one of the two primary types of display ad campaigns. Direct response campaigns typically promote a specific product or service, and have a very specific follow-up objective that advertisers want visitors to take after clicking on an ad. Direct response campaigns typically de-emphasize traditional metrics such as click-thru rate or cost-per-click and instead evaluate the success based on custom metrics such as cost-per-account.

The direct responses for which advertisers are looking may include:

  • Opening a new account / creating a new membership
  • Starting a free trial
  • Downloading a whitepaper or other document
  • Signing up for an upcoming event
  • Subscribing to a newsletter
  • Completing a survey / form

Branding campaigns, on the other hand, promote a company more generally and aim to raise awareness of the products and services offered. A branding campaign would be more concerned with maintaining a high share of voice and less concerned with the new accounts created or direct sales generated.

Direct Response Campaigns

Below is an example of a direct response campaign; Comcast is advertising its high speed internet services, with the goal of opening new accounts:

Example of a Direct Response Ad

In a direct response campaign, showing an ad to a visitor or getting that visitor to click on the ad are ultimately worthless. Comcast is not worried  about overall recognition of the company (in fact, the Comcast name doesn’t even appear) but is instead focusing on opening new accounts.

Visitors who click through on the ad but don’t set up an appointment or request more information are ultimately worthless. In a direct response campaign, the results are typically binary: either the desired response is taken by a visitor, or it isn’t.

Publishers & Direct Response

There are both positives and negatives to being considered for a direct response campaign. Many advertisers focusing on direct response have very challenging goals to meet. For example, Comcast may have a $100 cost-per-new account target, meaning that they are looking for sites who can directly contribute a new account for every $100 spent.

In many cases, these goals are very difficult to reach and most publishers will fail to perform well enough. That will often lead to the advertiser cutting the spend before the entire campaign has been completed.

However, if your site is able to consistently deliver results that help an advertiser achieve their direct response goals, you will likely see a recurring revenue stream in the form of future campaigns.

Direct response campaigns require some unique considerations not needed for branding efforts.

Direct response campaigns are essentially a tryout with a very quick fuse. If your site fails to perform, you’ll likely be cut and won’t be considered by the same advertiser for quite a while. As such, it is important to try to maximize advertiser value. Some strategies may include:

Even if you price aggressively and strive to deliver significant value, it is very possible that you’ll still see your spend cut and you won’t be able to keep the advertiser. Plenty of quality publishers aren’t able to be effective parts of direct response campaigns, especially if the advertiser has very aggressive conversion goals.

Branding

Branding campaigns tend to be more general in nature, promoting the general visibility of a company. In addition, the primary goals of these campaigns tend to be rather basic; a branding campaign is generally not evaluated on advanced metrics such new accounts or memberships, time on site, or item downloads.

Branding vs. Direct Response

There are two general types of display ad campaigns:

  • Branding: The focus is on getting relevant ads in front of as many qualified viewers as possible. In many cases, branding campaigns will have messaging that promotes the company in general.
  • Direct Response: The focus in on driving visitors to a landing page, and often on generating new accounts, leads, members, or some other additional step beyond simply clicking on an ad. Direct response campaigns will often promote a specific product or service, or at least have a specific objective.

The screenshot below from CNN Money includes an example of both types of display ad campaign:

Examples of Branding and Direct Response Campaigns

The smaller ads near the top for TD Ameritrade and E*TRADE are classic direct response ads; the goal is to get visitors to open a new account. Clicks on these ads that don’t lead to new accounts are ultimately worthless to the advertiser. These campaigns are likely evaluated on one key metric such as cost-per-new account; the company may be willing to pay up to $100 for every new account opened. Sites that don’t meet that threshold will be cut from the campaign.

The medium rectangle ad for Gucci on the other hand, is likely part of a branding campaign. Though the advertiser obviously wants visitors to click through and complete a purchase of Gucci apparel, the primary goal is to build brand awareness that may lead to purchases down the road. As opposed to the direct response-focused TD Ameritrade, every ad impression shown is valuable even if it is not clicked because it helps to familiarize visitors with the brand.

Gucci likely generates a relatively small percentage of total revenue from online sales, and uses web-based ads to build awareness of its brand and products. As such, it will be pretty difficult for the company to directly associate future revenue (which may come at a bricks-and-mortar store) with an ad impression served weeks earlier.

Direct response campaigns tend to be more intensely managed, analyzed, and optimized than branding campaigns. Direct response campaigns also involve a higher turnover among partner publishers, as agencies test potential partners and quickly cut those that don’t perform. Branding campaigns tend to return to the same sites over and over.

If a site is not performing in line with expectations using key metrics such as cost per lead or cost per new account, the advertiser or agency is likely to shift the spend. This may involve reallocating dollars within a campaign to different line items or cutting a publisher site entirely.

There tends to be a very high hurdle for direct response campaigns; if ads on a publisher site are not meeting the minimum metrics needed, that spend will be eliminated. Branding campaigns, on the other hand, tend to be much more forgiving. Advertisers often see value in maintaining a presence and high share of voice on certain sites even if metrics such as click-thru rate or cost-per-click are high.

From a publisher and ad seller perspective, branding campaigns are appealing because the advertiser has limited interest or ability to measure impact. While all spends are carefully planned and budgeted, the mid-campaign changes and optimizations are relatively rare in pure branding campaigns. Publishers have a lower risk of underperforming and seeing their spend cut.

Fill Rate

This term relates to display advertising, and can be used to quantify the effectiveness of either a sales team or a network at maximizing the number of ads shown by a site. The formula used here is very simple:

Fill Rate = Ad opportunities successfully filled / Total ad opportunities

A 100% fill rate is optimal; that means that every time there was an opportunity to show an ad to a visitor, one appeared. A fill rate of less than 100% means that a failure to show ads at every opportunity resulted in at least some lost income.

A missed ad opportunity occurs when a page loads but no ad appears in one or more of the open ad positions. This may occur for several reasons, including:

  • Lack of demand (i.e., there are no ads from direct deals or ad networks continuing for a spot)
  • Technical error / sub-optimal technical set-up

The link below includes some further reading for troubleshooting any apparent shortfalls in fill rate.

Most ad networks should be able to provide 100% fill rate on all ad requests made by publishers. If you are having issues with networks struggling to find demand for your available ad impressions, you may want to consider an alternative network.

Fill Rate vs. Coverage

Within Google AdSense, the term “coverage” is used to mean the same things as fill rate. Here’s how their help center describes this term:

For example, if you have 3 ad units on a page, you’ll generate 3 ad requests. If two of these ad units display ads and one displays no ads, the coverage for this page would be 66.67%. Likewise, if you have a search box, coverage of 80% means that an average of 1 query out of 5 shows no ads with the search results.

Calculating Fill Rate

Understanding fill rate is easiest through an example. Suppose that every page on a site includes a 728×90 leaderboard near the top. As such, we would expect that for every pageview, an ad impression is recorded.

If the site gets 500,000 pageviews and there are 475,000 ad impressions recorded, the fill rate would be 95%.

Ad Blocking

Fill rate doesn’t consider as that are not served due to visitors using ad blocking programs. There are a number of services that can be used to prevent ads from appearing when a page is loaded, which is obviously an undesirable event for the publisher. There are some recently-developed solutions that can help advertisers break through these ad blockers, including PageFair.

Ad Network

As it relates to Web monetization, an ad network is essentially a middleman who specializes in bringing together publishers and various types of advertisers. There are different types of ad networks, including display ad networks, email ad networks, and affiliate networks.

Examples of networks include:

  • Google AdSense
  • CJ Affiliate (formerly Commission Junction)
  • Rakuten LinkShare

Ad Network IllustrationAd Network Services & Benefits

Though advertising networks have become increasingly complex in recent years, the simplified illustration to the right captures their most basic functionality. Networks can effectively provide 100% fill rates to publishers looking to monetize their ad inventory but unable to establish direct deals with sponsors or advertisers.

The most obvious advantage of using an ad network is the supply of advertisements to run on your site. Even if you’ve only sold a portion of your inventory, you will be able to display an ad on every page.

Another service provided by networks, however, relates to the administrative burden. Sites that use ad networks exclusively never have to worry about preparing and sending invoices, tracking earnings, or optimizing the pool of advertisers. In many cases, they are simply required to add a few lines of code and then let the ads start running.

Revenue Share

Networks bring liquidity to smaller publishers who may otherwise be unable to monetize their traffic. And they bring scale to large advertisers who don’t have the willingness to craft individual deals with thousands of small publishers.

In exchange for these services, networks make money by taking a portion of the total gross revenue generated. In other words, only part of what the advertiser pays ends up with the publisher. The total amount is split between the publisher who creates the ad impression and the network that handles the actual trafficking and serving of the ad to the publisher.

Network Uses & Alternatives

Many publishers who do sell ads directly will still utilize networks as a solution for monetizing any unsold inventory. Our entry on remnant ad space has much more detail on effective strategies here.

For sites that don’t want to use networks, there aren’t many good alternatives. One involves simply letting the space go unused–serving a blank space where the ad would be or collapsing the ad unit area entirely (the latter is a much better strategy).

Alternatively, house ads promoting other products, services, or sites owned by the publisher can be run in any remnant inventory.

Picking the right network for your site can be very challenging. There is generally no shortage of options when it comes to picking a network. There are countless ad networks to choose from and numerous affiliate networks as well.

There are a number of factors to consider when selecting an ad network:

  • Depth of advertisers / fill rate: A major benefit of networks is reliably high fill rates. If a network can’t guarantee close to 100% fill rate, they may not be worthwhile.
  • Technology / relevancy of ads: Ad networks that are able to serve ads relevant to your audience will typically deliver the highest click rates and earnings.
  • Quality of advertisers: Ideally, a network will run relevant ads from high quality, non-spammy advertisers.
  • Degree of publisher control: The best ad networks will give publishers flexibility to block certain advertisers and categories.
  • Flexibility of ad units: The best ad networks will be able to supply ads of all shapes and sizes.
  • Mobile compatibility: As the percentage of mobile traffic grows, it is increasingly important for a network to be able to monetize traffic from mobile devices and tablets.
  • Payment terms: The best ad networks will pay their publisher partners quickly and with minimal adjustments.

Viewable Impression

An ad impression occurs whenever an ad serving platform (such as DFP or OpenX) loads a display ad on a webpage. However, many impressions that are “served” are never seen by a visitor if they appear on a section of the site that requires users to scroll down from the initial load.

A viewable impression refers to an ad that is displayed in a viewer’s screen for a specified amount of time. That doesn’t necessarily mean that it is viewed–some banner blind visitors completely tune out ads–but that it was at least viewable.

Ads that are above-the-fold are visible as soon as a webpage loads, and are therefore viewable impressions (assuming that the visitor doesn’t scroll past them before the minimum viewable time is met).

Ads that appear below-the-fold will typically load along with the rest of the webpage. If, however, the visitor doesn’t scroll down to the portion of the page where these ads are located, these ads would never be viewable.

All Recipes ExampleViewable Impression Example

Let’s assume that the adjacent webpage, from AllRecipes.com, is loaded but that the visitor never scrolls down. As a result, only the content above the black horizontal like is ever visible.

When this page load occurs, seven ad impressions would be recorded. However, only  two viewable impressions would occur: the 728×90 leaderboard and the 300×250 medium rectangle at the top of the page.

All of the ad impressions below the fold would only be considered to be “viewable” if the visitor scrolls down and puts them into the screen for a minimum amount of time.

Other Applications

The concept of a viewable impression can impact various metrics as well:

  • Viewable CTR: This term refers to the click-thru rate only on viewable impressions. This would be calculated as: total clicks / viewable ad impressions.

 

The concept of a viewable impression will likely become increasingly important for sites that monetize through direct ad sales.

Many advertisers and agencies are making a push to pay only for viewable impressions during CPM-based campaigns. As this becomes the common practice, it will reduce the number of impressions for which publishers are allowed to bill. This could obviously have an adverse impact on revenue, especially for sites that sell a large amount of below-the-fold under a CPM model.

If you are currently monetizing a large number of non-viewable impressions via CPM-based ad campaigns, you may need to begin considering alternatives for these units. In a few years, it is very possible that almost all advertisers will only pay for viewable impressions. This will likely set off a number of changes in the display ad industry, including a general increase of rates.

Demographics

As it relates to web monetization, this term is most relevant to display ad sales. Specifically, demographics or “demos” refers to statistics that can be used to convey the makeup of a site’s audience. Most commonly, demographic data will be included in a page or section of a site’s digital media kit.

Below is a page from the Entrepreneur.com digital media kit, which includes a section dedicated to the audience demos:

Example of Demographics in Media Kit

Commonly used demographic data includes:

  • Male / female split
  • Breakdown of age
  • Household income ranges / average
  • Breakdown of Professions
  • Level of education

In addition to these generic demographic categories, many sites will provide most customized demographic data to highlight unique aspects of their audience that may help to convince advertisers of the value available in a campaign. For example, a site focused on sports may collect data about the average number of hours visitors spend watching televised games or the number of live events they attend each year. These “custom demographics” could be useful in convincing a ticket broker or apparel retailer to run an advertising campaign.

Compiling Demographics

There are several potential sources of demographic information that can be used in a media kit:

  • ComScore: This is the gold standard in web demographic data; a ComScore subscription will allow you to accumulate very detailed data in a number of categories. Unfortunately, this data is very expensive to acquire; an annual membership can cost upwards of $30,000.
  • Quantcast: This service provides more basic demographic information such as age, gender, and household income breakdowns. It’s also free, which makes it a much better option for many publishers. Below is a screenshot of the Quantcast dashboard for Eonline.com:

Eonline

  • Google Analytics: The information available here is fairly generic, but Analytics can provide breakdowns of where visitors are coming from, how long they stay, what type of devices they’re using, and which browsers are being used to view a site.
  • SurveyMonkey: For acquiring custom information about an audience, surveying platforms can be useful ways to gather information.

Rich Media

Rich media ads generally look similar to standard display ads. They are often packaged in the same standard sizes; rich media ads can come in the form of a 728×90 leaderboard or a 300×250 rectangle.

However, when they are served there are more possibilities for engagement than simply a click-through by visitors. For example, rich media ads may allow for a video to start playing when a user clicks a certain section or may expand to provide more information based on user action.

Rich Media Examples

Below is an example of a rich media 300×250 rectangle. Note the “Click to Expand” button that appears within the ad:

Example of Rich Media Ad

When this button is clicked, the ad expands to the right. A video with sound also begins playing within the ad (see also the entry on expandable ads). This ad has two examples of user-initiated interactivity: an expansion to the left and a video embedded within the ad.

Example of Expanded Rich Media Ad

Another common use of rich media involves an ad unit expanding to take over the screen if users hover on the ad for a long enough period of time (generally a few seconds). Here’s how this looks while the user is hovering (click on ad to see a more dynamic demonstration):

Example of Expanding Rich MediaOnce that hover has lasted for a few seconds, the ad expands to take over the entire screen.

Again, this high impact takeover is being driven by the user interaction; it only occurs if the mouse remains hovered over the ad for a specified amount of time:

Example of Expanded Rich Media Ad Unit

For many more examples of rich media ads, see the link to Google’s gallery full of samples in the Resources section below.

Measuring Rich Media

Many rich media ads will allow more in-depth interaction. Whereas most standard text and display ads simply direct visitors to a landing page, rich media ads may be capable of delivering additional information without sending visitors to a third party site.

Advertisers and agencies who use rich media will often measure the success of these campaigns by a metric called engagement rate. Because the advertiser can accomplish their objective without getting visitors to click through to a site, simply measuring the CTR of an ad won’t tell the whole story.

If you’re a publisher who is selling directly to advertisers, you have a couple decisions to make regarding rich media.

The first is whether or not you want to allow rich media ads to appear on your site. For the vast majority of publishers, there is no reason to prohibit rich media. Though the high impact ads can be a bit intrusive, rich media ads only expand via user interaction (meaning that unwanted expansions generally won’t occur).

Implementing rich media ads typically doesn’t require any additional work; in most cases, publishers wouldn’t know whether the third party tags they receive are rich media enabled or not. However, because of the increased value to advertisers there may be an opportunity to charge more.

Many publishers will give advertisers the option to use rich media, and require a premium to the standard non-rich media rates. Below is an example of this; note at the bottom of the rate card the additional fee for rich media:

Example of a Rich Media Premium

Skin (or Skinned Homepage)

This high impact ad unit makes use of space on a website that is traditionally blank. It is best understood by seeing an example of it in action.

Below is a standard page on IMDb.coma popular site for information about movies and TV shows:

Example of Non-Skinned Page

There are two standard ad units on the page, including a 728×90 leaderboard and a 300×250 rectangle.

This site regularly sells skins to advertisers, often in connection with the upcoming debut of a major film. Below is an example of a “skinned” home page; in addition to the two standard ads dedicated to Amazon creative, the background that is usually empty space has been covered with a custom ad:

Example of Skinned Ad Unit

This ad implementation can be very effective for a couple of reasons:

  1. The appearance of ads in locations where visitors do not normally see them helps to overcome banner blindness, and effectively get the messaging across.
  2. The ubiquitous nature of the advertiser’s messaging creates a strong sense of co-branding, allowing the advertiser to leverage the reputation of the site (i.e., many visitors will envision an endorsement of sorts from the publisher, even if none is explicitly given)

How To: Implementing & Pricing

As you may have guessed, implementing this type of ad unit will require quite a bit of work by both the advertiser (who must make the creative files) and the publisher. Skins can not be served in the same manner that standard leaderboards and rectangles are shown. Getting these creatives to appear in the proper place will involve some time and effort from your development team, depending on how much of your site will be covered.

For many publishers, implementing a skin will be surprisingly simple. Though it looks complex, a skin is often no more than two or three image files pieces together around the outside of a site. If the skinning involves only a single page (such as the homepage), it may be a relatively short task to upload the creatives. However, you’ll need to engage your development team up front to provide the exact technical specifications required (e.g., sizes needed) in order to avoid confusion with the advertiser.

As mentioned above, skins have the potential to deliver significant value to advertisers.

As such, this ad implementation should be priced at a large premium relative to standard ad units. Though each site and advertiser relationship varies, a rule of thumb would be to charge an effective CPM between 200% and 500% of a standard above-the-fold leaderboard.

In most instances, it won’t make sense to propose a skin on a CPM pricing model because tracking the exact number of impressions is challenging. Rather, a skin could be priced at a flat fee or included in a larger placement such as a homepage takeover that has a flat rate.

Split Testing

Also known as A/B Testing. This is basically running an experiment with the goal of determining which variables impact performance of a web site (and specifically, which variables result in higher performance). There can be many goals of a split test, but they generally involve increasing key metrics such as time on site, conversion rate, click rate, or ARPU.

This process gets its name because it generally involves splitting traffic to a specific page into multiple segments, with each group seeing a slightly different version of the page. Below is an example from WhichTestWon.com, a valuable resource for split testing ideas and inspiration:

Example of Split Testing in Action

In the example above, the differences between the two versions are minimal and not related to the site layout or design. Split testing can involve changes of very different magnitudes; in some cases, a single word may be changed, while in others the complete layout of the site is affected.

As a best practice, limit the number of variables you change in a split test. Changing too many factors at once will give you uncertain results; you won’t know which changes helped and which hurt.

Split Testing & Monetization

There are countless ways to use split testing to improve overall monetization. These include:

  • Testing ad styles, colors, and fonts (this can be done through AdSense Experiments)
  • Testing ad positioning and sizes (this can be done through services such as AdPushup)
  • Testing price points of paid membership products
  • Testing different affiliate marketing offers
  • Testing different display ad and affiliate networks
  • Test email layouts, subject lines, and split tests (platforms such as MailChimp offer this functionality)

Split Testing Tools

There are a number of tools designed to help site owners conduct scientific split tests. These include products intended to greatly simplify the process, enabling those with limited technical skills to set up different designs and run tests. Ten of these tools are highlighted in the resources below.

To many site owners, split testing seems like a process that is high complexity and low priority.

In reality, however, it can be pretty easy thanks to tools such as Optimizely and AdSense Experiments. Moreover, split testing has the potential to result in a meaningful increase in bottom line revenue for sites that are already generating significant traffic.

If you’re not sure where to begin testing, here is some advice for getting started:

  1. If you use AdSense, set up an Experiment using the dashboard and monitor the results.
  2. Sign up for one of the “dead simple” split testing apps highlighted below; there are low end tiers with very reasonable price points for each.
  3. Sign up for the WhichTestWon newsletter (also linked below) to start getting ideas for test implementations
  4. Identify your largest revenue stream, and set up a single split test

Monetization

Monetization is a very general term that refers to the process of generating revenue. Though it can apply to all types of transactions and businesses, the focus of this site is monetization of web traffic (i.e., the visitors to a web site).

Perhaps the best place to start understanding web monetization is with examples of sites that are not monetized. While most websites are part of a business or even a non-profit organization that has some revenue targets, there are plenty of sites made for a purpose besides earning money. Specifically, many web sites by government offices operate only to provide information and don’t seek to make any money. Here are a few examples:

Compare these to most sites that you’ll visit attempt to make money from their visitors in one way or another, whether it be selling a product or showing an ad.

Common Monetization Methods

There are a number of different ways to monetize web traffic, and many sites use a combination of different approaches in order to maximize revenue. The most common ways to monetize web traffic include:

  • Showing display ads
  • Selling memberships
  • Affiliate marketing
  • Capturing and selling leads
  • Selling products
  • Collecting donations

“Indirect” Monetization

For most web-based businesses, monetization does not occur as a direct transfer of money from a customer / visitor to the publisher. Instead, most web monetization strategies involve a third party (i.e., in addition to the publisher and the visitor to the site). For example, advertisers pay to have their messaging shown to visitors of a site.

Monetization Metrics

There are a couple of common metrics that are used to measure and express how effectively a site is being monetized. These include:

  • Revenue per Thousand Impressions (RPM): The amount of revenue earned for every 1,000 pageviews on a site. (See the RPM entry for more detail)
  • ARPU: Average revenue per user. The amount of income earned for each unique visitor to a site.

These two metrics will be very highly correlated; an increase in one typically means that the other will also rise (and vice versa).

If you run a website that is generating some amount of revenue, there are two primary ways to make more money:

  1. Grow traffic
  2. Improve monetization of current traffic

Many site owners tend to spend a lot of time, energy, and money on the first bullet above, specifically on SEO-related strategies. However, there are often relatively easy ways to improve monetization efforts. These can include:

  • Selling ads directly
  • Increasing visibility of and engagement with display ads
  • Finding and serving targeted affiliate marketing campaigns
  • Increasing signup rates of paid membership products
  • Activating additional revenue streams, such as email, co-registration, and video

Lead Scrubbing

Sites that monetize via lead generation typically have an automated process for collecting contact information (i.e., generating these leads). For example, visitors to a site may be prompted to fill out information in a widget similar to the one shown below:

When these leads are being sold to aggregators or third parties who intend to sell products or services to these individuals, the process of “scrubbing” the leads is often necessary to avoid charging for worthless information. For example, some visitors may enter names such as “John Doe” or a phone number as “123-456-7890” or an email address as “[email protected].com. The lead scrubbing process involves reviewing the list of leads generated and removing any worthless leads that are associated with bad information.

Avoiding High “Scrub Rates”

When the lead capture widget acts as a “wall” preventing visitors from accessing certain content, the percentage of scrubbed leads can be relatively high. This wall often prompts visitors to enter in bogus information in order to make the desired content visible.

When the lead capture comes in the form of a request for more information, there is little incentive for visitors to enter false contact information (there’s little point in requesting information using an email address that you’re unable to check or a phone number you’re unable to answer). For example, forms like this one should see lower instances of bogus information:

There are also strategies that can be employed to drive visitors to submit real contact information. For example:

  • Reject any phone number starting with “555”
  • Reject any email address not containing @ or a dot
  • Reject non-valid ZIP codes
  • Reject phone numbers or email addresses already captured
  • Email verification (i.e., require visitors to click a link in their email address to confirm validity)

Unqualified Lead Scrubbing

Though this page has focused on removal of leads containing bad information, lead scrubbing can be broken down into two types:

  1. Removing Nonsense / Fraudulent Leads. As discussed above, it is often necessary to remove any bogus leads.
  2. Removing Unqualified Leads. A more sophisticated process involves removing any leads deemed to be low quality, and thus unlikely to lead to a sale. For example, some aggregators may not accept leads from certain geographic areas or below a certain credit score.

This second type of lead scrubbing will typically be more dependent on the exact niche in which the site operates and the data points that are collected in the lead generation process. For example, lead capture widgets that collect multiple pieces of demographic information provide additional opportunities for lead aggregators or buyers to filter out certain leads.

Publisher Action

For most sites that monetize via lead generation, lead scrubbing is going to be a frustrating part of the business that reduces your overall revenue. Unless you’re a major player with the ability to negotiate custom deals and contracts, you’ll generally be subject to the decisions of lead aggregators or other buyers when it comes to scrubbing.

This is one of the reasons why it pay to develop relationships with multiple buyers and not rely too heavily on a single company to monetize your leads.

Lead Generation

This term is commonly used to refer to the general process of acquiring the contact information of potential clients.

Many companies will engage in lead generation practices in order to identify potential new customers for their products and services. However, there is also a popular Web monetization strategy that involves collecting contact information (i.e., generating leads) and then selling them to other companies to whom these leads would be valuable.

Companies generally have multiple Web-based sources of potential new customers, including:

  1. Organic search traffic
  2. Paid search engine marketing
  3. Paid display advertising
  4. Purchased leads

An insurance company, for example, may use all of these techniques to find new customers. In many verticals, purchasing relevant and qualified leads from sites who are experts in capturing them will result in the highest ROI.

It’s worth noting that many leads generated online relate to products and services that are not Web-based. In fact, many of the most profitable lead generation niches revolve around traditional businesses such as car insurance, legal services, and senior care (there are some notable exceptions, such as online dating). Though these are more tangible products sold through traditional channels, many interested shoppers now research the different options online.

Monetizing via Lead Generation

This monetization strategy generally involves:

  1. Publishing a site in a targeted, high value niche;
  2. Implementing a lead capture widget to collect contact information from your visitors;
  3. Selling any leads collected either to a lead aggregator or a company interested in selling to that individual.

Lead generation can occur in a number of verticals, through there are a handful of niches where this practice is particularly common (the Guide to Lead Generation in the Resources section below has more information on the most popular lead gen areas).

Lead Gen In Action

Sites that monetize primarily through lead generation strategies are often subtle in their attempts to capture contact information, primarily because many visitors aren’t entirely comfortable with their information being bought and sold.

The “capture” part of the lead gen process is often disguised as a simple form to receive more information or unlock additional functionality:

Example of Site Monetizing through Lead Gen

Lead Generation Models

Many of the suggestions for building a successful lead generation business focus on maximizing the capture of information from visitors once they are on a site. However, the first step in this process obviously involves building a site that will attract visitors interested in a specific topic. Many lead generation sites rely on paid search engine marketing to drive traffic, attempting to devise a system that sees them generating more revenue from each visitor than they pay to acquire.

Many successful lead generation sites are built around databases of information that attract consumers interested in a particular product or service. For example, LoopNet.com is built around a database of real estate available for rental or purchase:

Example of Monetizing via Lead Generation

The above screenshot captures only the database side of this site. When users zero in on a specific property, they are exposed to a lead generation widget that will pass along a message and contact information (such as email address and phone number) to a specific broker or landlord.

Universal Ad Package

The IAB, an industry dedicated to growing the digital advertising marketplace, maintains several groupings of ad units. The Universal Ad Package contains four of the most commonly-used display ad sizes:

  • 180×150 Rectangle
  • 300×250 Medium Rectangle
  • 728×90 Leaderboard
  • 160×600 Wide Skyscraper

Below is a screenshot of additional details on these ad units (click for web view):

Universal Ad Package Technical Specs

There are very few direct uses of the Universal Ad Package; there are no real standards with which publishers will need to comply. It is more useful for those designing or redesigning a site or part of a site. Ideally, publishers will have enough flexibility to allow them to offer a number of both traditional and high impact ad units to advertisers.

If, however, a site’s design will be more static, it is advisable to utilize ad units found in the UAP. These ad units are commonly created by advertisers, meaning that these sizes will have the highest fill rate and will be the most likely to accommodate direct sales prospects.

Waning Poplularity

The 180×150 ad unit included in the UAP has become much less common in recent years; it is very likely that it will be replaced eventually (perhaps by the 300×600 large rectangle).

In general, the UAP has been losing market share to newer, higher impact ad units. While the absolute number of ad impressions to the components of the UAP will likely continue to rise for several years, more and more publishers are also embracing more disruptive ad units that more effectively communicate the messaging of advertisers.

The links below contain a valuable resource for keeping table on several of the newer ad units.

CTR (Click-Thru Rate)

This metric is relevant to a number of monetization strategies, including display advertising and affiliate marketing. In general, the higher the CTR, the better the overall monetization will be. This is (obviously) especially true for sites monetizing via CPC-based ad networks, where revenue is earned only when a visitor clicks on an ad.

The term “click rate” is synonymous with CTR.

Though CTR is most commonly used when discussing the performance of ad units, it can be applied to any call to action. For example, a site may want to measure the CTR on the various tiles in its nav bar, the CTR of links in an email newsletter, or the percentage of visitors who click on an “upgrade” or “sign-up” button related to a paid membership.

There are a number of factors that impact the CTR of ad units or other calls to action:

  • Relevancy: If ads are related to the content covered on the site (and specifically the page where they appear), they are more likely to be clicked. This is especially important to consider when evaluating ad networks to monetize any remnant inventory; ad networks that automatically examine the context of a page and serve up ads related to the topics covered will be more effective monetization solutions.
  • Location: Certain sections of a webpage are viewed more frequently and more intently than others. Positioning ads or any other type of clickable item in a site’s “hot spots” will generally lead to higher click rates.
  • Styling: The appearance of ads in particular impacts the CTR they will realize. While each site is unique, in general ads that are styled to match the surrounding site will see higher CTRs.

The Resources section below includes several links with suggestions for optimizing CTR.

Direct Sales Relevancy

Though CTR is usually discussed regarding ad networks, it is also very relevant for sites that monetize by selling ads directly. CTR is one of the key metrics that many advertisers and agencies will monitor to evaluate the performance of their campaign (though many now place a higher priority on CPC and CPA).

In this context, CTR measures how relevant your site is to their target audience; theoretically, sites with well positioned ads and a very relevant audience should see the highest click-thru rates.

Visible CTR

A better measure of the success of an ad or other call to action may be visible CTR. This metric, which is currently challenging to calculate, would indicate the percentage of visible ad impressions that were clicked. For below-the-fold ad units–those that aren’t immediately visible when a web page loads–there may be a significant difference between the two. (For above-the-fold ad units, these two metrics should be nearly identical since all ad impressions are visible at least initially to visitors.)

Geo-Targeting

This concept is pretty straightforward: some advertisers will want their ads to appear only to visitors accessing a website from a specific location. Most commonly, advertisers request that their ads be shown to U.S. visitors only.

This is generally an optimization technique; if an advertiser isn’t equipped to sell their products or services to consumers outside a specific country, there is no point in paying to show ads to visitors who aren’t able to become customers.

In other situations, advertisers may with to hyper-target visitors in specific locations. For example, the Southwest ad below was likely geo-targeted to serve to visitors in specific cities or ZIP codes:

Example of a Geo-Targeted Ad

This ad is promoting a very specific product (a flight from Chicago to Cancun) that will be relevant to only a very small portion of the population. As such, the advertiser has an interest in avoiding “wasted” impressions of this ad unit to web traffic that would have no interest in purchasing this flight (for example, people living in California).

Geo-Targeting Capabilities and Pricing

It is up to publishers to implement geo-targeting restrictions on campaigns, though many advertisers are now able to monitor the locations of visitors to whom ads are served. Many ad serving platforms have relatively advanced geo-targeting capabilities now; below is an example of the interface used in DFP that can focus in on specific countries, states, and even cities:

Example of Geotargeting in DFP

Some generic geo-targeting requests, such as excluding non-U.S. traffic, generally won’t merit an increase in rates. However, “hypertargeting” requests such as the Southwest example above may warrant higher pricing. Typically, geo-targeting requests beyond the basic “U.S. only” warrant a premium of 10% to 50% above the rate card.

Cost Per Action (CPA)

CPA is one of the three primary pricing models for Web-based monetization, along with cost per mille (CPM) and cost per click (CPC). Cost per action is generally the pricing model friendliest to advertisers or merchants, since they pay only when a certain action is completed (and thus don’t pay for ad impressions or clicks that don’t lead to the desired conversion).

CPA arrangements can compensate publishers via either a percentage-based commission (for example, getting 5% of all purchases completed by referrals) or a flat fee (for example, a $50 commission for every account opened by referrals).

Below is an example of an affiliate on the CJ Affiliate platform that gives referring sites a percentage of any sales generated:

Example of Commission Based CPA Model

Here’s an example with a different approach; this merchant gives a flat fee of $80 for every sale resulting from an affiliate’s site.

Example of Flat Fee Affiliate Marketing Offer

The CPA model is friendly to advertisers because they only pay when a specific action is taken. In most cases, that means that they will only make a payment to merchants after a profitable transaction is completed. In the example above, the $80 payment that Media Temple makes is a large outflow. But if they earn $200 in revenue for every sale, they are guaranteed to see a profit as the net result of any payment.

Similarly, the first merchant may have an average profit margin of 10% on their sales. Even after paying up to 7% to the referring affiliate, the profit margin would remain positive.

Put another way, publishers earn revenue at different points depending on the pricing model:

  • CPM: Publishers earn revenue whenever an ad is shown.
  • CPC: Publishers earn revenue when an ad is shown and a visitor clicks on that ad.
  • CPA: Publishers earn revenue when an ad is shown, a visitor clicks the ad, and the visitor goes on to complete a specified action (such as make a purchase or open an account)

Though CPA arrangements are generally seen as advantageous to the advertiser, certain publishers may prefer this pricing model too. Specifically, if publishers are able to deliver a high number of clicks and the referrals convert at a high rate, they may be able to realize a very high effective RPM or average revenue per user.

Monetizing via Affiliate Marketing

The CPA pricing model is used in almost all affiliate marketing campaigns, with merchants paying affiliates each time a specific action is completed.

Affiliate marketing can potentially be a profitable monetization strategy for some sites; it tends to work well when the topic of a site is extremely focused in a vertical where completed sales or transactions can be valuable. See our e-book Guide to Affiliate Marketing, part of our larger Web Monetization Handbook, to read more on this topic.

Lead Aggregator

A lead aggregator is relevant to sites that monetize their traffic by attempting to capture certain contact information about its visitors. For example, a site that collects information about visitors who are interested in making a real estate purchase is generating assets that can be very valuable to certain companies or professionals (in this example, realtors or real estate firms).

For publishers generating a small quantity of leads, it may be challenging to find buyers. Many large buyers of  leads are interested in purchasing in bulk from known partners. Lead aggregators can provide liquidity to these smaller partners by purchasing their leads, and then packaging them for re-sale to major buyers. In an effort to avoid administrative work as well as falling victim to fraud, many buyers of leads will prefer to work with a small number of lead sellers whom they are able to trust.

A lead aggregator is the equivalent of a display ad network; it is a “middleman” that essentially matches up publishers with buyers of leads. In addition to providing liquidity (i.e., purchasing leads) aggregators will often bring technology solutions to the table. This may simplify the process of capturing, scrubbing, and selling leads for many publishers.

Benefits of Going Direct

Ideally, publishers who are monetizing via lead generation would be selling leads directly to companies interested in reaching their audience. This is similar to display ad monetization; publisher who are able to establish direct relationships can cut out the ad networks and keep a higher percentage of revenue for themselves.

Display ad networks make money via a revenue split that sends a portion of the advertiser spend to them. There is no explicit revenue split employed by lead aggregators; instead, these companies will typically mark up the price of leads purchased from publishers. For example, a lead purchased by an aggregator for $8 may be sold for $10.

Still, there is an opportunity for publishers who are able to “go direct” to keep more revenue for themselves. In the example above, a direct relationship with the lead buyer would enable them to sell leads for $10 each instead of $8.

Interstitial

This high impact ad unit is similar to a pop-up ad, except it appears in the same window as the regular site content (many pop-up ads open in a new tab or even in a new window). Because interstitial ads open in the same window as the site content, they won’t be impacted by pop-up blockers.

Interstitial ads are usually accompanied by a “graying out” of the content on the page being viewed in order to drive attention to the messaging of the ad. Below is an example of an interstitial ad unit in action (a link to this page is included in the adjacent table):

Example of an Interstitial Ad Unit

An interstitial can also appear over all site content (i.e., without the content visible in the background). In this case, the interstitial is typically accompanied by a link that will close the ad and return visitor to the page they were viewing (a link to the example below is also included in the table):

Example of Full Page Interstitial

When to Run Interstitials

Interstitials are high impact ad units, and should generally only be used in special situations. This ad implementation is primarily relevant for sites that are monetizing by selling directly to advertisers. Many CPC ad networks, including Google AdSense, prohibit partners from serving their ads in any sort of pop-up mechanism.

Because the interstitial ad results in a disruption of content consumption, this ad unit must be frequency capped. In other words, many visitors to your site will be willing to put up with an interstitial ad occasionally covering up the content, especially if the ad is relevant and your site provides high quality content. However, even the most loyal of visitors will likely get annoyed if these ads begin appear multiple times during a visit. It is also advisable to avoid showing interstitial ads on the very first page viewed during a session; that initial impression may drive away visitors who would have otherwise engaged with multiple pages on your site.

For example, a publisher may set up an interstitial to run on the fifth page viewed by a visitor, and to only show one interstitial per week.

Including Interstitials on Proposals

Interstitial ad units require additional time to set up properly, and can have adverse impacts on some user experiences. As such, publishers should be compensated with rates above standard ad units.

An interstitial should be viewed as a type of presentation of an ad, meaning that this implementation can be executed on ads of various sizes. Most commonly, a 300×250 or

Finally, it is worth noting that some advertisers may prefer not to have their ads appear as interstitials despite the higher visibility and click rates. Advertisers may be worried about associating their brand with an ad implementation that some visitors will deem to be annoying or invasive. As such, publishers should generally only include advertisers who have specifically approved this type of ad unit.

Interstitials are similar to some other high impact ad units, including pop-ups and welcome ads.

Welcome Ad

Welcome ads typically appear before a visitor lands on a specific Web page. This ad is typically the primary content on a page, though it may be accompanied by a welcome message as well.

Forbes.com is perhaps the best-known user of a welcome ad; anyone trying to navigate to this site, including the home page or specific sub-URLs, will first see a whole page welcome ad:

Example of Welcome Ad on Forbes.com

This welcome ad has a separate URL (you can see the Forbes one here) and in some cases will automatically forward to the relevant page after a few seconds.

While welcome ads are traditionally used at the beginning of a session on a website (hence the “welcome”) some sites feature them at other points in the process. Below is an example from the online version of Merriam Webster Dictionary; when clicking on a term, visitors are first directed to an intermediate page with a partial definition and a prominently positioned ad:

Example of Mid Session Welcome Ad

From this page, a visitor will have the option to continue on to the full definition.

Pros & Cons of Welcome Ads

The advantages of the welcome ad are pretty obvious: it is a high impact ad unit that can generate incremental display ad revenue with minimal cannibalization of existing ad units.

The potential drawbacks should be pretty clear as well: the welcome ad may annoy some visitors, leading to fewer pageviews and return visits. As with many high impact ad units, frequency capping of a welcome screen is a must; visitors should not be exposed to this ad unit repeatedly.

Welcome ads may also impact the SEO visibility of your site. The properties that regularly use welcome ads tend to be older, established properties who have established a reputation for quality with search engines. Younger, smaller sites could potentially see the negative side effects of welcome ads (specifically, a high bounce rate) have an adverse impact on search engine visibility.

Pop-up Ad

Pop-up ads generally appear unexpectedly, opening up in a new tab or browser window on certain websites. The result typically includes both a highly visible and effective ad unit as well as a diminished user experience. Pop-up ads are both extremely effective at attracting attention and generating clicks and extremely annoying to most visitors. As such, there is often a trade-off between the revenue generated and the user experience.

Below is an example of a pop-up ad in action:

Example of a Pop Up Ad

Many of the most popular ad networks, including Google’s AdSense, prohibit partner publishers from serving their ads in pop-ups. However, there are a number of networks that allow or even specialize in pop-up ads. These include:

High Impact Ads

As pop-up blockers have become increasingly common components of browsers, the frequency of pop-up ads has diminished significantly. Moreover, as visitors have become less willing to deal with pop-ups, many publishers have found the trade-off between between revenue and user satisfaction to be no longer worthwhile. Still, many sites still use pop-up ads as a way to focus attention on display ads and boost overall revenue.

There are several other types of high impact ad units that function in generally the same way as pop-ups, though are distinguished by the details of the appearance:

  • Interstitial: Appears in same window, often overlaid against grayed out content.
  • Welcome Ad: A separate screen containing an ad that is displayed before the first pageview on a site.
  • Pop Under: Opens in the background of a screen, either in a new tab or new window.

Earnings Per Click (EPC)

This metric typically refers to the amount of revenue that can be expected to be earned for every 100 clicks through to an affiliate link.

This metric is often displayed by affiliate marketing networks to help publishers evaluate and compare the earnings potential of different merchants. Below is an example from the CJ Affiliate dashboard:

Example of EPC on Commission Junction

The formula for determining EPC is:

Affiliate earnings / Number of clicks from affiliates x 100

Predictive Power

However, there are many reasons why the EPC indicated on an affiliate marketing platform may be much higher or lower than what a site will actually realize if the ads are run.

This is primarily due to variance in the conversion rate between sites. Under an affiliate marketing model, the click from a publisher’s site through to the advertiser doesn’t actually generate any revenue. Instead, the referring site earns a commission only when a certain action is completed (such as the purchase of an item or opening of an account).

As such, the percentage of clicks that convert to completed transactions has a major impact on the EPC realized by an affiliate. In general:

  • If a site’s conversion rate is higher than average, the realized EPC will be higher than the reported EPC
  • If a site’s conversion rate is lower than average, the realized EPC will be lower than the reported EPC

Higher = Better?

While the EPC can be a useful metric for comparing affiliate marketing offers, it shouldn’t be the only number that publishers consider. To illustrate this point, suppose you run a blog about old cars and are evaluating two different merchants. Here’s merchant number one:

ATT

And here’s merchant number two:

Image of Affiliate Marketing EPC

The first hypothetical merchant (AT&T) has a very impressive EPC; for every 100 clicks, affiliates earn almost $350. That’s more than 10x what the second merchant offers.

But the relevancy of the second potential merchant is much higher. As a result, the click rate would likely be much higher for the second. Moreover, the conversion rate would also be generally higher for relevant merchants.

Put another way, the earnings from an affiliate marketing campaign can be expressed as:

Pageviews x click rate x conversion rate x commission

The EPC metric considers only the final two variables in that equation (and those two only on average, not for a specific site). The click rate that can be expected is very important as well. The link in the resources below contains more suggestions for properly evaluating different affiliate marketing offers.

ARPU

This metric can also be presented as revenue per visit (RPV), revenue per unique (RPU), or revenue per unique visit (RPUV). All of these terms refer to the same metric, which can be calculated through a simple formula:

ARPU = Revenue / Unique Visits

This metric traditionally incorporates multiple revenue streams. For example, if a site monetizes through display ads, affiliate marketing, and e-commerce the ARPU metric would include revenue associated with each of these strategies.

This metric is the ultimate measure of how effectively a site is monetizing its traffic. It also reflects one of the two primary ways a site can make more money: 1) get more visits or 2) improve ARPU.

ARPU also indicates the amount of money that a site can expect to generate for each additional visitor it receives. For example, if a site has an ARPU of $0.01 could expect to earn an incremental $100 for every 10,000 new unique visitors it attracts.

ARPU vs. ARPU

The concept of average revenue per user, also abbreviated ARPU, is relevant to a number of different businesses. For example, a cable company may track ARPU to measure the amount of money made from each of their subscribers.

The revenue generated per user will typically be significantly higher than the revenue from a visit to a web site.

Out Clause

An out clause is usually relevant in the context of a display advertising contract. This is typically a section of the IO that indicates the ability of the advertiser to cancel the campaign with specified notice period. For example, a 7-day out clause would indicate that the advertiser can stop a campaign by giving 7 days notice to the publisher.

This applies to the entire length of the contract; an advertiser may give this notice before a campaign even starts delivering, halfway through, or eight days before the campaign is scheduled to end (which would effectively cancel only the last day of the campaign).

IAB Standard

Under the IAB standard terms and conditions, advertisers can cancel an order with two week’s notice. The following is taken from the “Cancellation and Termination” section of the terms:

Unless designated on the IO as non-cancelable, Advertiser may cancel the entire IO, or any portion thereof, as follows: i. With 14 days’ prior written notice to Media Company, without penalty, for any guaranteed Deliverable, including, but not limited to, CPM Deliverables. For clarity and by way of example, if Advertiser cancels the guaranteed portions of the IO eight (8) days prior to serving of the first impression, Advertiser will only be responsible for the first six (6) days of those Deliverables.

In other words, if an insertion order doesn’t specify any out clause, the default for all advertising relationships is a 14-day out clause.

Publisher Options

The ability of advertisers to exercise their out clause and effectively cancel a committed spend with only a week’s notice is obviously not ideal for publishers. There is, however, little room to get around this option; as mentioned above, it is a component of the standard terms and conditions used in the industry.

The best advice for publishers looking to prevent an advertiser from exercising an out clause is to deliver value. If a campaign is successfully generating clicks and leads, the advertiser is unlikely to pull the plug.

The good news is that out clauses are rarely exercised. Once a proposal is accepted and an IO signed, most advertisers will see through full delivery.

If a campaign or certain line items that make up a campaign are underperforming, it is more likely that the advertiser will seek to “optimize” by shifting impressions to higher performing line items or seeking additional bonus media.

Trafficking

This term is relevant to sites who are attempting to monetize their web traffic by selling ads directly. Trafficking occurs once a proposal has been accepted and an IO has been signed. This process basically involves setting up each individual line item in the relevant ad serving platform, uploading creative, and performing any verification required to ensure that everything will be functioning properly once the campaign begins.

Trafficking Responsibilities

Trafficking can be used to refer to responsibilities on both the advertiser (or agency) side as well as the publisher. The agency component of the trafficking process typically involves:

  • Gathering creative files / generating tags
  • Incorporating or identifying click-thru URLs for ads
  • Naming ad files or tags
  • Uploading or sending to publisher

The ultimate deliverable from this process is a file or group of files containing all the digital assets needed to run the campaign.

Once the publisher receives this data from the advertiser, there are a number of tasks that must be performed on that end:

  • Creating individual line items within ad server, including entering in the number of impressions to be served and the start and end dates of the campaign
  • Uploading creative files to appropriate line items
  • Inserting macros into creative files where appropriate
  • Testing ads to confirm proper appearance and functionality.

This involves some manual work in ad ad serving platform, such as DFP:

Example of Ad Trafficking

It is somewhat common for the trafficking process to involve some back-and-forth between publishers and advertisers / agencies to confirm that the set-up of the ads in the serving platform matches what is specified by the IO and expected from both sides.

Larger publishers will generally have a person or multiple team members dedicated to trafficking. For smaller publishers or entrepreneurs, this responsibility may fall to the sales reps or be passed on to other roles.

Scalable

This term is relevant primarily to display ad proposals prepared by members of a sales team. Advertisers or agencies will often request that proposals be “scalable” to different budget levels. This generally means that the same pricing level applied to a proposed spend would be applicable even if the client elects to spend a smaller amount of money.

In practice, this means that the advertiser is requesting that any volume discount offered for large spends can be transferred to smaller spend amounts as well. This term is frequently used when publishers are invited to submit proposals that include multiple budget levels.

Scalable In Action

To understand what an advertiser or agency means by “scalable” an example is very helpful. Suppose that an advertiser sends out an RFP inviting publishers to submit proposals at a $100,000 budget level with scalable line items. Our theoretical publisher includes a line item that looks like this:

Example of Scalable Line Item

If the advertiser requested scalable line items, they would expect some flexibility in changing the size of this spend component. That could extend higher, if the advertiser decided they would like to spend more money on this placement:

Example of Scaled Up Line Item

More importantly from the advertiser perspective is the ability to scale down this proposed component of the campaign if desired. This would essentially allow them to receive the same pricing (in this case a $10 CPM) even if they cut back their budget:

Example of a Scaled Down Ad Spend

There are obviously some challenges to publishers in presenting scalable line items.

It inherently involves offering a volume discount on low volume spends that wouldn’t normally qualify for such a reduction in price. In the example above, the publisher may only offer a discounted CPM of $10 on spends that involve 1 million or more impressions. Offering that rate on much smaller spends means lost revenue for sales reps and the publishers they represent.

While each situation is unique, any concern about lost revenue associated with presenting scalable ad impressions should be minimal. It is relatively rare for clients to return a counter-proposal that would feature a significantly lower number of impressions with any line item.

Moreover, lost revenue from a scaled down spend is still good news for most publishers: it means that they’ve won a campaign from an advertiser and have successfully made a direct sale. For large well-known brands that have no problem attracting advertisers, this may not be all that noteworthy. But for smaller sites trying to transition from ad networks to a direct sales infrastructure, this is a big accomplishment.

RPM

RPM stands for revenue per mille (French for “thousand”). This metric represents a way to express the amount of money that a website is earning each time a visitor arrives or clicks through to a new page. If the RPM is scalable, it also indicates the amount of incremental revenue a site can generate for every additional pageview it receives.

For example, suppose a site is realizing an RPM of $15. If that site is able to generate an additional 1 million monthly impressions, monthly revenue would be expected to increase by $15,000.

Calculating RPM

RPM is calculated as the revenue from every 1,000 pageview, but could easily be translated to the revenue for each individual pageview. Because each individual pageview on most sites generates a small amount of money, however, it is easier to express the revenue for a larger number. For example, a $15 RPM translates to just 1.5 cents per pageview.

RPM is the revenue of CPM (cost per mille), which represents the expenses paid by an advertiser for 1,000 ad impressions. However, even sites that monetize through non-CPM strategies are able to report their earnings rate as RPM. Consider these monthly revenue figures for a hypothetical site:

  • CPC-based ad networks: $2,500
  • CPA-based affiliate campaigns: $5,000
  • CPL-based co-registration: $1,000
  • Direct sold CPM-based ads: $3,500
  • Total: $12,000

If this revenue was generated on 1,000,000 pageviews, the RPM realized would be: $12,000 / (1,000,000 / 1,000) = $12.

Note that even though the site earned money via CPC, CPA, and CPL campaigns, it is still possible to report the revenue in RPM

Understanding Key Variables

For example, many sites that utilize display ads participate in CPC-based ad networks. That means that they earn revenue not simply by loading a webpage by by showing a webpage with an ad that a visitor clicks. If they’re lucky, more than 95% of the pageviews will generate zero earnings; the small percentage of pages that contain a clicked ad account for all the revenue.

When judging the earning capability of a site, however, the CPC metric is only a part of the equation. Specifically, that equation looks like this:

Revenue = Pageviews x CTR x CPC

As an extension of the above:

RPM = CTR x CPC x 1,000

In the equation above, there are two variables that the publisher can control: number of pageviews and the click-thru rate. The CPC earned is determined by the network partner, so there is really very little that can be done to impact that number. The publisher can, however, get more traffic (through SEO, email marketing, or other strategies) and can change the frequency with which visitors click on the ads on a page (by changing the positioning and style of these ads).

RPM is used most commonly to discuss the revenue rate associated with display advertising campaigns. But this metric is equally applicable to other revenue streams as well; it can be applied to earnings from mobile ads, email-based ad campaigns, e-commerce, and affiliate marketing.

RPM is ultimately one of the most important metrics to anyone running a web-based business. It’s important to understand the limitations of this number in order to avoid hurting your overall monetization efforts.

Specifically, it’s important to understand that in many cases there are multiple revenue streams that roll up into the bottom line RPM of a site. These revenue streams are often separate and therefore may seem unrelated. But there are often trade-offs between different strategies, which can lead to overestimating the impact of experiments. For example, a site may be using both CPC-based ad networks (e.g., AdSense) and affiliate marketing campaigns (e.g., through CJ Affiliate).

Let’s assume that the site is realizing the following RPMs from these strategies:

  • AdSense: $2.50 RPM
  • Affiliate Marketing: $1.50 RPM

Now let’s say this site wants to try out a new monetization strategy: sponsored content. So they implement a widget from Taboola or Outbrain below articles that looks like this:

Taboola Example

The idea here is obvious enough: adding this widget to the site will hopefully generate more clicks and help the publisher make more money. If this widget starts delivering an effective RPM of $1.00, that would seem to be a huge win.

But it’s important to also measure the extent to which this ad unit cannibalizes other ad units on the page. For example, it’s very possible that after the implementation of the sponsored content widget the monetization picture for the site looks something like this:

  • AdSense: $1.50 RPM
  • Affiliate Marketing: $1.25 RPM
  • Sponsored Content : $1.00 RPM

Though the sponsored content widget seems to be a success in this case–it has an RPM of $1.00–the addition of this piece to the puzzle has actually reduced overall earnings. The overall site RPM has dropped from $4.00 to $3.75, meaning that for every 1,000 pageviews the site now has $0.25 less in total revenue.

Scenarios like this happen quite a bit. The sponsored content widget in this case ended up cannibalizing its fellow ad units; many of the clicks it received were not incremental, but simply reallocated from other units.

Creative

Once upon a time, agencies would deliver the artwork featuring their client’s ads by hand. Nowadays, creative is delivered in a digital format–usually as an attachment to an email or line of code contained within a spreadsheet.

Creative imply refers to the file that becomes a display ad appearing on a site, mobile browser, video player, or other medium. Creative can take many formats, including:

  • Image (PNG, GIF, JPEG)
  • Flash File (SWF)
  • 3rd Party Tag

Below is a screenshot of the window that appears in DFP when a publisher is uploading new creative.

Example of New Creative Upload in DFP

When an advertiser or their agency says that they will be “delivering creative” at a certain time, it means that they will be sending an email with attached image / Flash files or delivering the HTML code that can be entered into an ad serving platform.

Third Party Tags

Though some advertisers still send individual image or animated files for every ad they want to run, more and more simply sent snippets of code that publishers can upload to their ad serving platform. This approach allows the advertiser or their agency to maintain control of the ads that appear on their end. It also allows the advertiser to rotate through different ads without uploading multiple files; a single snippet of code can be instructed (by the advertiser / agency) to display multiple different ads on the publisher’s site.

Implementing third party tags is simple in most ad servers; it generally involves just pasting a snippet of code and clicking a button to preview and activate.

Expandable Ad

Expandable ads are a “high impact” marketing strategy that helps to overcome banner blindness and get the advertiser’s messaging through to visitors of a website. There are a number of different types of expandable ads. Specifically, these ads are often differentiated by the action that prompts the expansion. Some ads will expand automatically when a page is loaded; others will expand only when the user takes a certain action (such as clicking or hovering for a set amount of time).

Below is an example of an expandable ad unit in action:

Example of an Expandable Rectagle Ad

Technical Specs

The IAB specifies a number of standard expanding ad units, though custom sizes are also popular. The before / after dimensions of the most common expandable ad units are:

  • 300×250 to 600×250
  • 180×150 to 600×150
  • 160×600 to 600×600
  • 300×600 to 600×600
  • 728×90 to 728×315

When proposing or discussing an expandable ad unit, it’s also important to note the direction of the expansion. For example, if a site features a 300×250 ad unit in its right rail, the expansion would most likely need to occur to the left (i.e., towards the center of the page). Similarly, a leaderboard near the top of a page would most likely expand down.

The amount of work required to run an expandable ad depends on the infrastructure of the site and the platform used to serve ads. The links below include instructions for implementing expandable ad units in DFP.

Expandable vs. Pushdown

Expandable ad units extend to cover over the content on a site. A similar implementation is the pushdown, which moves all content on a page lower in order to create additional space for an ad unit.

Example of a Pushdown Ad Unit

 

The user experience is generally similar, but not quite identical. Pushdowns will require more work from a technical perspective on the publisher’s side, whereas expandable ad units are relatively easy to implement.

To Expand or Not to Expand?

Expandable ad units are a type of rich media, meaning that s special creative file is required. As such, most advertisers don’t produce expandable ad units when preparing for a campaign; these ads are still somewhat rare.

In general, the use of expandable ads diminishes the user experience. In other words, some visitors to your site may view these ads as disruptive and more annoying than standard display ads. As such, if these ad units are included on a proposal there should be a meaningful premium (i.e., higher CPM) relative to standard ads. As a rule of thumb, we would recommend pricing expandable ad units at a premium of at least 50% – 100% to standard display ads.

It would also be advisable to limit the frequency of expandable ads. Most visitors to your site will likely tolerate an occasional expanding ad that disrupts their experience. But if they encounter this every time, they may get frustrated with the poor user experience and slow speed of your site.

Adding high impact ad units to your offerings may seem like a huge task. But it can actually be very easy.

As mentioned above, many ad platforms can accept expandable ad units as third party tags, meaning the the process for uploading these is substantially similar to standard Flash of GIF ads.

For more disruptive ads such as pushdowns (and many more), Undertone is an ad network that may be worth investigating. This network deals exclusively in non-traditional ad implementations, allowing publishers to leverage their tech platform to get these ads up and running.

The resources section below has a link to Undertone’s rich media gallery, which includes examples of a number of high impact ad implementations.

Insertion Order (IO)

An insertion order is the final step in the ad proposal process; when an insertion order is signed, it represents a commitment from an advertiser (or their agency) to run a campaign on a publisher’s site(s).

An insertion order will generally contain all the details surrounding a spend, in order to avoid any confusion about what the advertiser will be paying for. These details typically include the following for each line item that makes up the campaign:

  • Start date
  • End date
  • Ad unit dimensions
  • Impressions to be served
  • Pricing structure
  • Total cost

An insertion order also includes a spot for representatives of both the publisher and advertiser (or agency) to sign and date to confirm the agreement.

Insertion Order Responsibilities

An insertion order can be prepared by a publisher, advertiser, or agency. If the advertiser is represented by a large agency, that agency will typically prepare the IO. If there is no agency involved or if the advertiser is represented by a smaller agency, it may fall upon the publisher to prepare the IO to be signed by the advertiser.

An insertion order is the final confirmation that a publisher has won a spend from an advertiser. There are a few additional things to know about this document:

  • In a perfect world, an IO will basically mirror the proposal submitted. But when the agency prepares an IO, the publisher should review thoroughly to make sure there are no major changes to the proposal and that the publisher will be able to deliver all the contacted placements.
  • Most line items on a proposal should be pretty straightforward. But if there is any confusion about what is being delivered, clear it up before the campaign begins. Otherwise, there may be questions and delays when it comes to billing.
  • Come up with a way to store any signed IOs in an organized way. You will inevitably need to reference again in the future, and it will pay off to have an organized storage system.

Sample IO

If you’ve been asked by an advertiser to prepare an IO, but aren’t quite sure where to begin, we can help out with a reusable template. This Excel file is a simple but completely usable insertion order that can be sent to advertisers once completed.

Example of an Insertion Order (IO)

Homepage Takeover

Homepage takeovers are a relatively common strategy used by advertisers to crowd out any competition from one of the most viewed pages on a specific web site. This implementation is simple; it involves giving 100% share of voice to an advertiser on the home page of a site, resulting in no other ads being seen:

Homepage Takeover Example on Digiday

The example above features standard ad units occupied by Integral. Homepage takeovers can also include higher impact, non-traditional placements. IMDb.com regularly implements a homepage takeover the includes the IAB standard units on the homepage as well as “skins” that surround the content.

Below is an example of this in action:

Spiderman

Homepage Takeover Rationale

Homepage takeovers are appealing to many advertisers for a number of different reasons:

  • High Impact. Essentially, the theory here is that 1 + = 3. In other words, the reinforcement of the advertised brand gets additional exposure as a result of being seen multiple times on a page.
  • Co-Branding. The high frequency (i.e., 100% SOV) of the ads also allows advertisers to maximize the co-branding benefits that come with being associated with the publisher. A homepage takeover is a way to create a link between the respected publication and brand being promoted.

For most sites, the homepage will be the most heavily-trafficked page. As such, it’s the most commonly targeted page for a takeover. However, it is also relatively common for advertisers to “take over” other pages on a site (more on this below).

Homepage Takeover Pricing

The simplest way to price a homepage takeover is to charge the advertiser the standard CPM for the ad units shown. For example, assume a homepage that includes a 728×90 leaderboard normally priced at a $5 CPM and a 300×250 rectangle priced at $15. If the homepage receives 2,000,000 monthly views, the price tag would be $40,000 ($20 x 2,000).

In some instances, however, it may make sense to price this offering either above or below the standard rates. The reasoning is as follows:

  • Higher CPM: As mentioned above, the homepage takeover can deliver additional value by coupling ads from the same advertiser together. Moreover, it generally requires some additional work to implement properly.
  • Lower CPM: Because homepage takeovers generally represent a substantial number of impressions. As such, it may be appropriate to give a volume discount.

Because the exact number of impressions is difficult to estimate in advance, many publishers will estimate or simply charge a flat fee that roughly corresponds to the effective CPMs deemed to be appropriate.

Many large publishers sell homepage takeovers on a flat fee basis. Yahoo! and AOL reportedly charge close to $500,000 for advertisers to take over their homepages for a single day.

Many publishers also offer “roadblocks” that are substantially similar to a homepage takeover. Roadblocks may include pages besides the homepage of a site. For example, an advertiser may wish to “take over” a page or set of pages related to their product or services. Below is a takeover by Sake Fifth Avenue on the Fashion & Style page of the New York Times:

Examples of a Takeover on NYTimes.com

Homepage takeovers have several advantages to publishers:

  • Opportunity to sell large percentage of total available impressions (assuming the home page is one of the most viewed pages on a site)
  • Opportunity to strengthen relationships with advertisers by delivering high value placements
  • High quality of advertisements (coordinated ads on the home page generally give a higher impression of quality, especially compared to text-based ads).

Below is an example of how a homepage takeover might be presented on a display ad proposal:

 

Screenshots

Agencies and advertisers will often ask publishers to provide screenshots of line items in action shortly after a campaign begins. This may seem like an unusual or complicated request, but it is actually very straightforward and simple. When a request for screenshots is made, the agency literally wants you to send images of the relevant ads running on your site.

If, for example, you work for CNN and have Southwest as a client, they would want you to send over something like this:

Example of a Display Ad Screenshot

Note that the image above includes a visual of the ad, confirming to the advertiser that the campaign is running.

Screenshot Origins & Necessity

Once upon a time, when media buys consisted primarily of print placements, advertisers could simply open up a magazine or newspaper and see their ad. That doesn’t quite work for online display ads; each ad impression is transient in nature, meaning that is viewable only for a limited amount of time. As such, many advertisers like to see visual confirmation that their campaign is running as contracted.

Screenshots are typically unnecessary, since agencies that utilize third party tags are able to confirm that the ads are running. However, many agencies with this capability still like to see screenshots.

It is also possible, of course, for advertisers or their agencies to capture and prepare the screenshots (it is possible for anyone with access to a web site to record a screenshot, just as we captured a screenshot of CNN.com above). However, this request is often passed along to publishers and falls upon them to complete.

Larger sites may have an entire role (or multiple positions) dedicated to client support tasks such as screenshots. For smaller publishers, this task may fall upon the sales rep.

Screenshot Details

Screenshots are generally requested for each line item on an IO. So if a campaign included 10 different line items, the request would be for 10 different screenshots. If a single page contains multiple ad units–such as a homepage takeover–a single screenshot should generally suffice.

Many advertisers will request that screenshots be inserted into a PowerPoint deck before being sent to clients. For others, simply attaching image files is acceptable.

 

Taking and sending screenshots is a manual process. While it can be done by using the Print Screen function and default programs such as Paint, there are some better programs out there.

Awesome Screenshot (link below) is perhaps the best free tool for capturing screenshots. It can be installed as a Chrome browser extension, and includes features that allow users to edit the captured image with text and shapes:

Example of Screenshot Edited with Awesome Screenshot

Rate Card

A rate card is essentially the menu of ad options available on a site. This document contains the cost, either on a flat fee or CPM basis, for the various ad units that advertisers may buy on a site.

This document is only relevant for publishers who are selling part of their ad inventory directly to advertisers. If you are using a network such as AdSense to monetize your display ad inventory, a rate card won’t be necessary. Ad networks are monetized primarily on a CPC basis, so there is no need to quote rates for inventory.

Below is an example of a rate card included in the 2013 media kit for PopSci.com (the online home of Popular Science):

Example of a Display Ad Rate Card

As shown above, a rate card can be a fairly basic document; for each available ad unit, it can include just the dimensions and the price. In the rate card above, most line items are shown on a CPM basis but some are priced on a flat fee (specifically, the e-newsletter and sponsored posts).

Other rate cards may include additional technical information or noteworthy restrictions on the ad units, such as:

  • Acceptable file formats
  • Rich media guidelines (note that PopSci indicates a $2 premium for rich media)
  • Available monthly impressions
  • Minimum spend amount

Typically, advanced technical specifications for ad units would be provided via a separate document known as a spec sheet. However, some publishers may also include relevant data on the rate card.

Once a rate card has been created, publishers need to know what to do with it.

Different publishers take different approaches on this topic. Generally, rate cards are not included in a media kit and are not made publicly available (a media kit is generally easy to find and download). However, there are obviously some exceptions (the screenshot above is a page out of a larger media kit that was available for download).

Many publishers will provide a rate card to advertisers upon request. There are a few advantages to this strategy:

  1. Forces advertiser contact. If an advertiser or agency is interested in your site after viewing the media kit, they’ll need to initiate contact in order to acquire a rate card. This personal introduction can be very valuable for a sales rep.
  2. Allows for flexibility. It will often make sense to tweak a rate card based on the potential client to whom it is being presented. Making rates available upon requests allows for this type of flexibility.
  3. Avoids bad first impressions. Some advertisers may be turned off by a rate card that features seemingly high costs. The above is a good example of a rate card with sky-high rates; a $62 CPM for a leaderboard ad is extremely high. However, if the rate card is accompanied by an explanation, potential advertisers may better understand the potential value of the placement.

Generally, we suggest keeping a rate card private unless an interested advertiser asks for it.

Medium Rectangle

This ad unit, often referred to as simply a “rectangle” or a “300×250,” is one of the most common display ad sizes. It is found on almost every website that monetizes through display ads and used by almost every advertiser running an online campaign.

The medium rectangle is a component of the IAB’s Universal Ad Package. Below is an example of a medium rectangle ad unit on HuffingtonPost.com:

Example of a Medium Rectangle Ad Unit

There are a number of other rectangular ad units that are also somewhat common in display advertising campaigns:

  • 180×150 rectangle
  • 300×600 large rectangle

Generally, horizontal ad units are referred to as “banners” to distinguish them from rectangle units (though banner units such as the 728×90 leaderboard are, of course, technically rectangles as well).

Share of Voice (SOV)

This term generally refers to the percentage of available inventory that an advertiser will achieve through a proposed ad placement. If an advertiser bought all available impressions on a site (i.e., had an exclusive sponsorship), they would achieve 100% share of voice. The formula for calculating is:

Ad impressions included on proposal / Total ad impressions available for unit during relevant period 

Share of voice is often requested by an advertiser / agency when completing proposals for an upcoming display ad campaign. Typically, there is a column on a proposal template where the publisher can indicate the share of voice associated with each line item that comprises that campaign.

Below is a sample display ad proposal (SOV column highlighted for emphasis):

Example of Share of Voice (SOV)

SOV is usually calculated on an ad unit basis, and can be referenced as a percentage of a single ad unit on a page or group of pages. For example, assume that every page on a site contains a 728×90 leaderboard and the site generated about 10 million pageviews monthly. A proposal for 1 million leaderboard impressions during a one month period would equate to a 10% share of voice.

If an advertiser is running a homepage takeover or other roadblock, these would generally be considered to be a 100% share of voice placement. Even though the advertiser doesn’t necessarily have the entire site taken over, they would own all of the impressions associated with the specified pages

SOV Considerations

Many advertisers like to achieve at least 10% share of voice on their placements. There is no real benefit to this threshold, and the share of voice realized ultimately has no impact on the performance of a campaign. This has more to do with the preferences of advertisers; they like to feel as if their ads have a meaningful presence on a site instead of appearing to only one out of 100 visitors or so.

This is one of those aspects of direct ad sales that will have to be managed by the representative. If a client is really concerned about realizing a high share of voice, the publisher may need to consolidate multiple line items into one.

End Date

This term is relevant primarily to sites that sell some or all of their display ad inventory directly to advertisers. On most proposals and IOs, there will be a column labeled “end date” that simply refers to the point at which a campaign is supposed to stop. Below is an example of how this may appear on a proposal:

Example of an End Date

This date should correspond to the date entered into the ad platform when setting up the campaign. Below is an example of this field in use in DFP (marked as “End time”):

End Date in DFP

Remnant

This term is relevant primarily to sites that monetize their traffic by selling display ad inventory directly to advertisers. Remnant inventory refers to any ad units that have not been purchased by an advertiser, and this must be accounted for using another strategy (more on this below).

Ideally, a site will sell every one of its available ad impressions directly to advertisers at premium CPMs. More likely, however, is that a portion of expected ad impressions will go unsold.

For example, assume a publisher is expected to generate 5,000,000 pageviews during the upcoming month (let’s further assume there is one 728×90 leaderboard ad unit on every page). If the publisher has sold 4,000,000 of those leaderboard ad impressions to advertisers, they will have 1,000,000 remnant ad impressions that must be monetized in other ways.

Options for Remnant Inventory

There are four primary options for monetizing remnant ad inventory:

  1. Serve nothing in place where ads normally appear
  2. Run a “house ad” promoting other parts of the site or related products and services
  3. Run CPA-based affiliate marketing banners
  4. Run CPC-based ads from ad networks

The first option is obviously less-than-ideal; it means that the publisher is wasting what could have been a very valuable ad impression. The other three options each have the potential to result in revenue for the publisher.

House ads are essentially ads that are promoting another stream of revenue for the publishers. Below is an example of a house ad on ESPN:

Example of a House Ad on ESPN

Without a direct-sold ad available to fill that position, the publisher instead elected to serve an ad promoting a show airing on the company’s TV station. This doens’t generate any revenue for ESPN, but can still benefit the overall company by increasing awareness of another of its products.

Options #3 (CPA-based affiliate banner ads) and #4 (CPC-based ad networks) above will likely not generate nearly as much revenue as a CPM campaign. Under both arrangements, the vast majority of ad impressions (those that aren’t clicked) are worthless. However, these remnant monetization techniques will ensure that the publisher gets at least some revenue from the ads that aren’t directly sold.

Most publishers dealing with remnant ad impressions have the goal of eliminating remnant entirely.

Remnant Strategies

Using networks can lead to some complexities when attempting to sell ads directly. Specifically, advertisers may be able to get their ads on your site without buying from your sales team. If they are also running campaigns with the network you’re using to monetize remnant inventory, they may effectively circumvent your sales team and hurt your direct sales efforts.

Most ad networks will let you block specific advertisers. This feature was designed to allow publishers to prevent low quality of competitive ads from appearing on their sites, but it can be used to force advertisers to buy directly as well.

Below is a screenshot of the AdSense dashboard that lets publishers block certain advertisers:

How to Block an Advertiser URL in AdSense

Impression

An impression is an event that occurs whenever a display ad is served to a viewer of a website. It is a common unit of measurement to reference the number of times a specified ad unit will be shown as part of a display ad campaign. When constructing a CPM-based display ad proposal, the number of impressions is used to determine the cost.

Impression Details

Impressions are generally calculated for individual ad units. For example, a site may have delivered 2,500,000 impressions of a 728×90 leaderboard ad unit during a month and 2,800,000 impressions of a 300×250 rectangle ad unit. If an ad unit appears on every page of a site, the number of impressions should approximately equal the number of pageviews received (see the relevant link below if this isn’t the case).

Impressions are also one of the variables in the equations to determine the CTR or RPM.

Specifically:

  • CTR = Clicks / Number of Ad Impressions
  • RPM = Revenue / (Number of Ad Impressions / 1,000)

Impressions vs. Viewable Impressions

In recent years, the concept of a “viewable impression” has become more common. Because the entire height of a webpage is not always viewable, it is possible for some ads to be served (and thus record an impression) without ever being seen by a visitor to that site.

For example, the black line below represents the “fold” above which content is immediately viewable upon page load. If a visitor to this page reads only the first paragraph and then closes out, they won’t see the Nissan ad (the 300×250 rectangle) at the bottom. However, an impression was still recorded:

Explanation of a Viewable Impression

In this example, the 300×250 ad unit would record an impression, but would not record a viewable impression.

This distinction is relevant only for CPM-based display ad campaigns. In a CPC-based campaign, impressions are less relevant because revenue is earned only when visitors click an ad (though publishers may want to know the rate of clicks-per-viewable impression that their ad units are attracting).

House Ad

This term is relevant for sites that monetize through display advertising as well as for those that have a subscription business or sell products online.

Suppose that your site features a paid membership product. In order to increase awareness of your products and generate new signups, you may begin a display ad campaign by purchasing ad inventory on other sites.

When ads promoting your products or services appear elsewhere, they are simply ads. When these ads appear on your site, they are referred to as “house ads.”

Many publisher will create house ads for use in their remnant monetization strategy. In other words, when ads have not been sold directly to an advertiser, the publisher must decide what to show in the ad unit. House ads are an alternative to filling this remnant space with ads provided by CPC ad networks.

House Ad Examples

Below is an example of a house ad running on WSJ.com, the online home of The Wall Street Journal.

Example of a House ad on WSJ.com

The 300×600 ad unit that normally displays ads from advertisers paying premium CPMs to appear there in this case features an ad promoting the company’s tech-focused product. There is no direct revenue associated with showing this ad as there would be if a CPM-based impression appeared, but the company still has the opportunity to generate revenue by funneling visitors to a different product on the site.

Below is another example on ESPN.com. In this instance, the ad is promoting a product on an entirely different medium (i.e., a TV show) that is owned by the same parent company:

Example of a House Ad on ESPN

House ads can be a valuable asset if publishers:

  • Want to avoid showing network-based CPC ads in order to drive direct sales
  • Are able to achieve high conversion rates and effective RPMs from the products being advertised

Many ad networks feature settings that allow publishers to label certain ads as “house ads” in their system. DFP, for example, has a House ad setting that can be used for any line item (link below).

It is now surprisingly easy to get high quality ads created if you don’t have a professional designer on staff. The following resources may be helpful:

  • BannerSnack is a web-based tool that lets users create ads from a number of professional templates (or from scratch if you have more design skills).
  • 99 Designs is known for logos, but also has a display ad option.

There are a number of similar web-based platforms out there that let users create their own ads or put them in touch with professionals who can create ads in a quick, cheap manner.