Thursday, February 14, 2008

Four Categories of Website Advertising Revenue

There are many ways to sell advertising on your website. They fall into four general categories. We'll look at each category, and see samples.

The categories are:
  • CPC advertising
  • CPM advertising
  • P4P advertising
  • Sponsorship
Cost-per-Click (CPC) advertising has become the de facto leader thanks to programs like Google AdSense. Essentially, advertisers display ads for free, and only pay when readers click the ads.

CPM (Cost-per-Mil) advertising is display advertising based on the number of page views, known as impressions. Typically the cost is measured in terms of dollars per thousand (mil) impressions. Many of the biggest websites sell advertising in this manner. This is to your advantage if you have lots of traffic, this way you are not dependent on your advertisers creating quality ads.

Pay-for-Performance (P4P) advertising is commission based. Not only must you readers click on an ad, they must answer a call to action. This could be making a purchase, signing up for a newsletter, or any of a number of definable actions. Amazon's Associate program is probably the most well known type of pay-for-performance advertising.

Sponsorship is one of the most traditional forms of advertising. It hit stride in the early 20th century when advertisers would sponsor radio shows. On websites, sponsorships can take several forms. Sometimes the sponsor will pay costs and fees associated with an event. Sometimes they will provide prizes. Sometimes they will simply pay an individual to endorse their product.

Over the next few days, we'll look at the pros and cons of each type of advertising. Generally speaking you will make the most money from one of the four types, but that doesn't mean you can't use any or all of them on individual website.
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