How to Estimate the Potential Advertising Revenues of Your Website

When starting a new website, it is good to have an idea of the potential income you can get from the website (well, if you're going to invite investors you actually need financial projections when writing a business plan).

But how can you estimate how much income you can get, especially for an advertising-based website? What kind of income can you get from the site that will allow you to make a living off your website?

It's not easy to determine potential income, but here are the variables you need to consider:

• What is the traffic potential of your site given its topic?
• What are your goals for the site: are you thinking of turning your website into a 800-lb. gorilla or just one of the small sites in your niche?
• What kind of revenue model are you planning to use -- purely cost per impression (CPM), or purely cost per click (CPC), purely pay for action (CPA) or a combination of all three?
• What ad types are you going to offer -- e.g. image ads, text link, newsletter advertising, etc?
• What kind of ad formats are you going to sell particularly for image ads -- banner ads, leaderboard, skyscrapers, rectangle boxes, etc?
• What is the average CPM being charged by your competitors?
• What marketing strategies are you planning to implement, and how aggressive these are, to get traffic to the site?
• Are you going to use third party providers such as banner or contextual advertising networks (e.g Google Adsense) or will you sell all advertising yourself? Or are you going to use a combination of both?

The Perils of Cheating

A Yahoo Answers user has been emailing me for weeks asking about the contextual advertising program Google Adsense. We run Adsense here at PowerHomeBiz.com and it's an advertising program that has worked really, really well for us.

After several back and forth of emails where I explained to him how the program works and offered him tips on how he could earn more from the program, he finally said that he's been clicking on his own ads. Not just once or accidentally, but every day. In fact, he even goes to various cyber cafes in his city just to click on his own ads. He's got a new website -- a site that at first glance has no value added and created merely to earn from Adsense. No wonder he complains that his site does not get any traffic.

I patiently explained to him that he needs to stop as Google will eventually catch his cheating ways. He persisted, even arguing that he goes to several cyber cafes, not just one per day, so the IP address changes.

This morning, he emailed me saying that Google kicked him out of Adsense because of invalid clicks, and that I was right all along. I couldn't pass up the chance to say "I told you so."

I can understand how the prospect of earning money simply by clicking on own ads can push a publisher to the "dark side" and click on their ads themselves. There's the lure of easy money. Or merely to check whether the program can indeed earn money for the publisher. Just monitoring the types of questions in Yahoo Answers regarding Adsense shows that many are clicking on their own ads.

However, be prepared for payback time. In Adsense case, the dreaded "you've been booted" from the program email. The main responsibility of advertising programs is to their cash cow -- the advertiser. And they need to protect the integrity of their program, part of which is to ensure that publishers are not generating invalid clicks for the purpose of inflating their earnings.

I told this Yahoo Answers user to forget about Adsense, and simply apply to other programs. But always to remember the lesson from Adsense -- that he can get kicked out if he cheats again.

Tips on Advertising Your Business

We recently had an issue with an advertiser regarding the creative for their text link. He wanted to use the phrase "Cool links" for their text ad. We told him that our audiences are not likely to respond to that text ad, but he insisted. True enough, his ad hardly got any clickthrough at all -- our audiences are typically looking for ways to make money, and they are not looking for "cool links."

When you advertise, whether you are using a banner, text ad or print campaign, you have to remember that your creative must meet 3 important checks:

• It must meet the readers or visitors needs
• It must generate a response
• It must have an immediate impact

The ad in the example I gave failed the first check in that our readers are not looking for "cool links" which is too vague and too sketchy (how do you define cool links -- it can be pictures of Angelina Jolie for one person or a funny video in YouTube for another person). Hence, the ad failed to generate a response and had no immediate impact.

The real success of an advertising campaign is based on action, so carefully craft your creative to generate the most response from your target audiences.

Reaching Target Customers and Determining Response Rates

If you're thinking of ways to reach your target market, the first step is to determine the right strategy you will use. And the right strategy is one that will allow you reach your audience at a very cost-effective manner, especially if you have tight resources.

Knowing the response rates for each strategy can help you understand how consumers react to the various medium, thus helping you determine the best marketing tactic for you.

According to the Direct Mail Association (DMA) in their The DMA 2005 Response Rate Report, the overall response rates of the various marketing strategies used are as follows:

• Mail = 3.40%
• Newspaper = 0.50%
• Catalogs = 3.67%
• Radio = 1.35%
• Magazine = 0.17%
• Direct Response Television (DRTV) = 8.14%
• Telephone = 8.55% (includes telephone follow-up to direct mail campaigns)
  

Lower Your Advertising Costs with Remnant Advertising

If you are promoting your business through advertising, you may want to consider buying remnant or surplus advertising. Remnant advertising is the unsold ad space, which often goes to public service or gone forever. Media companies, from radio, newspaper, magazine even TV, do not always sell their advertising space -- so they sell these spaces often at steep discounts. And tapping these remnant ad spaces can be an effective and inexpensive strategy for your business.

For newspaper and magazine advertising, you can check the remnant spaces available at MediaBids http://www.mediabids.com . Looking through the available ad spaces, Business 2.0's half page ad is available for a discount of $4540. A full page ad at Entrepreneur Magazine can save you more than $12,000 from their usual rate.

Access to information on remnant space is tightly controlled, so there are no similar marketplaces for radio or television that I know of. Though I know that remnant spaces for radio are discounted by 25 to 75% off retail prices.

If you advertise on these medium regularly, check with your media contact how to be able to buy remnant ad space. Just be ready with the creatives fast when a remnant space opens up. But buying these surplus ad spaces is one way you can stretch your marketing dollars.