making money from advertising

Since almost any site can accommodate ad banners, almost every type of site has. A revenue model that was once restricted to media companies is now open to all comers: chat rooms, software products, personal home pages you name it.

But the simplicity of the model is deceiving. Advertising as any site owner who's tried it can tell you is a far cry from easy money.

Advertising revenue depends on:

• Traffic to your site, which correlates with the number of ads you can serve.

• Price advertisers are willing to pay for ads.

• Performance of ads, which is usually measured in click-through.

traffic A common misunderstanding among site producers is that traffic = money. The more traffic you have, the more ads you can run. But that doesn't mean anyone will pay you for them. You need to have a user base that advertisers value or a way of targeting ads toward a specific subset to lure advertisers.

price Ad revenue is based not only on the number of ads you serve, but the price each ad commands. Prices can fluctuate widely, depending on the type of ad, the type of site, and even the time of year. But price generally correlates with the perceived value of the users and the context: The more valuable the audience, the more interactive the ad unit, and the more targeted the placement, the higher the cost.

performance All advertisers in all media are looking for results: They want to increase sales, raise awareness, create desire. Whatever their goal, they want to reach it.

But the impact of most advertising is fuzzy at best: How do you know the effect of a given TV ad? How many people actually saw it? How many people will buy your product as a result?

what advertisers want

• A targeted audience. They want to reach the right people at the right time.

• Impact. It's not enough to reach the right audience. Advertisers want to know their message was heard.

• Proof. Advertisers expect to receive reliable, audited accounts of how their ads did on your site.

All this changes on the web, where everything is quantifiable. You can tell exactly how many times an ad appeared and exactly how many times users clicked through. But this accountability hasn't worked in favor of web sites. The more sites deliver, the more advertisers demand of them, and the less tolerant they are of campaigns that don't yield high results as measured in click-through.

"The expectations of what the medium can deliver have never tapered off," said Internet advertising pioneer Rick Boyce. "The pressure has been on the Internet to do more, and deliver more, than any other medium has been expected to. I used to really resent that."

"In fact, I still do," he added with a good-natured grin. "Unfortunately, what marketers want, are expecting, and now increasingly demanding, is to understand what's happening along each step of the 'purchase funnel.' And that's extraordinarily difficult. And they want all that from the Internet media marketplace, which continues to face tremendous downward pricing pressure."

"It's really a hard business."

Selling ads?

6 ads that get noticed, p. 296

clickthrough isn't everything, p. 295

types of ads, p. 301

targeting ads, p. 300