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Banner Ad Calculator
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Will it pay you to buy a banner ad?
It all depends but here's a What If calculator to help
you examine the possibilities.
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Banner Ad Calculator |
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Costs |
Banner ads are generally sold on the
basis of CPM, cost per thousand impressions.
$20 CPM is typical but you can find rate cards asking $100 CPM
or more or as low as $10 CPM. Also note that rates quoted
on rate cards are usually negotiated down.
Generally, when you buy banner ad space, you buy it in a chunk
where the seller guarantees you a minimum number of
impressions. For example, they may show your
ad for a week and guarantee at least 150,000 impressions for
which you'll pay the CPM x 150. Others may count up the
number of impressions throughout the week, then send you a bill
based on the CPM. Most advertisers want to work with a
fixed maximum cost.
Sometimes ads are charged on the basis of cost per click through
or even cost per lead or cost per sale. These are less
common, however, than CPM.
Other costs are creating the ad graphic itself and tracking
the ad's performance, which are not included here.
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Assumptions
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This calculator assumes that the purpose
of the ad is to generate click throughs which in turn generate
sales. CTR is the assumed click through
rate, the percentage of people who see the ad who actually click
on it. CTR depends on the interest the banner generates.
CTR around 2% is typical but CTR of 10% is not uncommon.
Neither is CTR of less than 1%.
CTR depends upon many factors, some of the most important of
which are:
- Choice of audience
- Compelling message
- Bold colors
- Top of page placement
- Animation
- Call to action (e.g., "click here," "free
download" or "buy one get one free")
- Limited frequency of exposures
One of the good things about banner ads is that one can test
their effectiveness and respond quickly. Alternate two
banners on the same pages. Track CTR. Go with the
one that draws the best. Repeat.
How many of those who click through will eventually buy?
And when they do, what will they spend?
Take your best guess when getting started but collect statistics
to improve these assumptions with time.
Are you looking for a one-time sale or to acquire a new customer
that you'll sell to again and again? If you think in terms
of the one time sale, use the calculator as is. If you
think in terms of acquiring long term customers, use numbers
for what they will spend throughout the coming year
or use a figure for lifetime value (the subject of
another calculator).
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Do The Math
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Crank these numbers through the grinder
to arrive at the number of Click Through Visitors,
the Number of Buyers, the Cost per Visitor
and the Cost per Buyer and finally, the Net
Revenue per Buyer and the total Net Revenue.
Is it worth it? Jiggle your assumptions to see how
robust your Net is.
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What Have We Missed?
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This calculator assumes that the value
of the ad derives from the click throughs and subsequent sales.
But this must be an underestimation of the value of a banner ad.
Consider that with print, TV, billboards or any other kind of
ad, click throughs don't even exist!
There is branding benefit from banner ads, even if it's hard
to measure. And some people will have a better impression
of your product or company from seeing the ad which may lead
to sales even if they don't click on the ad. In those
cases, banner ads behave like non-interactive forms of advertising.
With this in mind, avoid a common mistake: make
sure your banner shows your company or product name! |
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©1999, Harry Tennant & Associates |
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