Advertising on the Web - Part 4 - How the Cost is Figured
How much do you have to spend? Wow, that's a lot!
Now how can you figure out how to spend it? (And once you think you know, what else should you do?)
Most Web advertising is sold by the same unit used in media like print and television: cost per thousand impressions, or CPM. CPM is calculated by dividing the cost of the advertising unit by the number of viewers and then multiplying by 1,000. If you pay US$20,000 for a banner flight on a site and they give you 1 million impressions, their CPM is $20. Incidentally, my second rule of Web advertising is: Always Do The Math. If you're having trouble turning impressions and dollars into CPM, it's helpful to have a calculator nearby.
To many eyes, the Web's a pretty expensive place with respect to CPM - at least compared to many other advertising media. Outdoor billboards and transit advertising, for example, dip down to $2 per thousand impressions, while the Web varies from around $5 per thousand to $100 per thousand. But the Web is relatively cheap from an "out-of-pocket" standpoint, since you can buy as much or as little as you have money for. Think of it this way: If you're going to buy a nationally broadcast ad on a TV show like Seinfeld that's watched by zillions of people every week, you'll need deep pockets, even if they've got a "cheap" CPM. On the Web - since you're still reaching a more elite demographic than the US population at large - the CPM efficiency is at least on par with television. Rick Boyce (of Wired Digital) has written an excellent article on this topic for the Internet Advertising Bureau, one that I'd recommend highly if you're a geek about media math.
If reaching as many people as possible without any sort of qualification is your goal, it's pretty easy to pick out the cheapest sites that give you the best visibility. But you'll pay more for targeting (if you're selling Windows 95 software, wouldn't you rather not be paying to show your ads to Mac users?), such non-traditional ad units as interstitials (ad pages that come up between links), sponsorships that transcend the norm, and other premium offerings. Be sure to ask the sales reps you talk to whether they have any "beyond the banner" solutions to offer.
CPM is still the currency of the Web, but the success of many campaigns is gauged on "cost-per-click" (CPC), which is the number of clicks divided by the cost of the campaign. Many sites offer cost-per-click buys outright. On the surface, this is pretty simple: if your goal is to pay 50 cents per click, why not just say that outright and find out what the sites can do for you? But be careful when doing CPC deals. Start with a site's CPM and figure out at what clickthrough percentage you'd end up paying the CPC they're offering. Many times you'll discover that buying at a cheap CPM and flighting great banners is your best option and will drive your costs down further.
