What is Banner Advertising?

Terms:

CPM - Cost Per Impressions (The "M" comes from the Roman numeral for 1,000). So $20 CPM represents $20 per 1,000 displays of a banner).

CPC - Cost Per Click. You pay an agreed amount for each click-through to your site.

Click-Through (CT) - A click on an ad which takes the viewer to another site.

Click-Through Rate (CTR) - This is the number of people who click on an ad (banner or text link) divided by the number of displays of the ad, represented in percentages.

e.g. 50 people click on an ad that has been shown 1000 times, which works out at: 50/1000 X 100% = 5%.

Run Of Site (ROS) - This means your banner will be displayed on most or all pages of the site.

Insertion Order (IO) or Purchase Order - This is just a simple order form, sometimes with terms of the contract, that the advertiser signs to confirm the details of the advertising campaign ordered. It's similar to an invoice, except it's not a request for payment.

Cancelable with no short rate - This terminology had me stumped when I first came across it.

What it means is that the advertiser can cancel their campaign at any time and be refunded for the unused portion without any penalty. Short rate refers to the penalty.

Let's say an advertiser has negotiated with you 10,000 impressions at your standard rate of $15 CPM ($150.00) and 5,000 impressions at a discount rate of $10 CPM ($50.00) and they pay you the full $200.00 fee upfront.

If they decided to cancel after the first 5,000 impressions, you have to refund $150.00 to them. You can't charge them $15 CPM (your standard rate) for the 5,000 impressions displayed, only $10 CPM (the lower rate) for the 5,000 impressions. Make sense?

What Is "Cost Per Impressions" Advertising?
Purchasing banner impressions (displays) is the most widely used form of advertising on the Internet. The usual pricing system is "Cost Per Impressions" or CPM (see above). Another pricing system is "Cost Per Click" or CPC (see above).
Costs?

Costs range from as low as $1 CPM for remnant space to $200+ CPM for sites targeted directly at professionals, such as Doctors, Lawyers and Senior Management.
The industry average is about $27 CPM. For an untargeted site, such as search engines, expect to pay about $10 CPM and $30 CPM for a targeted site.

How Many Impressions Should I Purchase?
You should request a test run of 10,000 or 20,000 impressions. This will give you an idea of how effective your banner will be in the site you wish to advertise in. If the site is untargeted, expect results of 0.5-1.0%. If it is targeted, expect anything up to 2 or 3%.
It is not unheard of to get click-through rates of 5, 10 or even 15% or higher. In fact this has happened in this site. Some advertisers have achieved a click-through rate of 8-14%. But this rare, rather than the norm.

Where Should My Banner Be On A Page?
Most sites only display one banner, usually at the top of the page. Some sites will display 2 banners in each page, one at the top and the other at the bottom. These are usually referred to as "top fold" and "bottom fold" of page, respectively.

Some sites display 2 different banners on each page, while others display the same banner at the top and bottom of each page.

Some sites display banners on a timed rotation system. The interval between each banner display can be as short as 30 seconds or as long as 5 minutes.

Each display of a new banner counts as one impression, no matter how it is displayed.

It is always best to go for the top fold of page, as the viewer is more likely to notice your banner, while the page is downloading. You should expect to pay a lot less for bottom fold of page banner spaces.

Think how many times you have visited a page, scrolled half way down and clicked on a link. Quite a few times? Well, if a banner was displayed at the bottom of the page, the advertiser would have been charged for it, yet you didn't even see it.

Where In A Site Should I Advertise?
Most sites only offer "run of site (ROS)" (see above) advertising, while some will offer banner spaces, targeted by page/s or section of a site. If you opt for targeted advertising, expect to pay a higher CPM rate for this, but you're likely to get a better click-through rate, as a result.

So What Does It Really Cost?
Well, let's assume that you pay a rate of $20 CPM (1,000 impressions) and your banner achieved a click-through rate of 1%.
1% x 1,000 = 10 click-throughs.

At a cost of $20 CPM, each click-through would cost you $2.

So is that worth it? Well, it really depends on your business. If one out of every ten visitors made a purchase in your website, and you made $50 net from each sale, then yes.

The maths: 10 visitors @ $2 each costs you $20. $50 profit from a sale minus the $20 it cost you to bring the visitors to the site, leaves you with a $30 profit.
If on the other hand, only one in 20 visitors made a purchase in your website, and you only made $25 from each sale, then no.

The maths: 20 visitors @ $2 each costs you $40. $25 profit from a sale minus the $40 it cost you to bring the visitors to the site, leaves you $15 worse off.
You have to either improve the click-through rate, by advertising in a more targeted site, or test new banners.

Alternatively, you can try to get a lower CPM rate, either with your current advertiser, or more likely, in another site.

Why Do Some Banners Perform So Poorly?
Don't blame the website or webmaster! It's more likely that the banner you're using is at fault, rather than the site itself. Your banner might be the most attractive banner you've ever designed and you love it to death. But, if it isn't doing its job, which is to get viewers to click on it, you must trash it and try some new ones.
This is the single biggest reason why banner advertising is becoming less and less popular. I find it bewildering that most advertisers don't bother to keep a close eye on the effectiveness of their banners, and if it doesn't work, test new ones. Even some big well known advertisers fall into this category.

I've had advertisers improve their click-through rate by as much as 500%, simply by testing new banners. If an advertiser was paying $20 CPM, and they improved their click-through rate by 500%, they have effectively cut their CPM rate from $20 to approximately $3.33. What a difference that makes!

So, it beats me why advertisers don't test new banners more often to improve their click-through rate. Especially when you consider that some of these companies spend tens of thousands, even hundreds of thousands of Dollars a month on web advertising. Wouldn't it prove cost effective to have at least one member of staff concentrate on improving their banner click-through rates?

Have you seen the same banner that was used a year ago, still being used? I have! Now, can you remember how many different adverts companies like Nike, Coco Cola or Budweiser has used over the last few years? Too many to remember, I bet.