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Banner Advertising

Banners are graphic advertisements (they may include animation) that are shown on web sites. You can buy banner advertising directly from many web sites, or through a banner advertising network which will display your banners across a range of sites.

Banner advertising is typically sold on a Cost Per Thousand (CPM) impression basis. This means that you pay a set rate per banner display ("impression") regardless of whether people click on or respond to the ad.

There are two widely publicized problems with banner advertising:-
  1. The average percentage of people clicking on banners has fallen dramatically over the last couple of years. Averages of 0.3% are not untypical. However, it is still possible to do considerably better than the average, by designing banners which are designed to generate a response - most typically banners which don't look like banners - for example - banners that look like "content". (I myself have banners in circulation that continue to generate 1.5% to 8% CTR using this technique).

  2. Many advertising-supported sites are struggling to survive on banner advertising revenue. This is because of the fall in advertising rates (driven by sites competiting to win advertising), and also because many sites are unable to sell more than a small percentage of their available space. Of course, from an advertiser's point of view, this is actually good news (at least in the short-term), as you may be able to get some great banner advertising deals.
To use banner advertising profitably you will need to get a good handle on your marketing statistics, and test out different banners:-
  • CPM = the amount you pay per 1,000 banner impressions.
  • CTR = the fraction of people clicking on banner (Click Thru Rate), e.g. 0.01 if 1% of people click on the banner
  • Conversion = the fraction of people who, after clicking on the banner, buy the product, e.g. 0.01 if 1% of visitors to your site buy your product
  • Profit = the gross profit (before banner advertising costs) that you make per sale.
Once you have these figures, you can put the numbers into the following formula, to calculate your maximum CPM cost to advertise profitably:

Max CPM  =  Profit X 1,000 X CTR X Conversion
Also using this formula, you can also calculate the break-even point for any of the factors, assuming you know (or can estimate) the others.

  • Opinions: Make sure you know what you're doing before spending a lot of money!
  • Applicable for E-Books for sale: Yes
  • Applicable for Free E-Books: Yes, but not recommended
  • Cost: Usually High - but that would be okay if you sell enough to cover your costs.



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