|January 25, 2006||Volume 5 Number 04 Issue 91|
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I am going to discuss the ins and outs of banner ads today. Are they worth your advertising dollars or are they a thing of the past?
When the Web first started, banners were all the rage. Today, they're pretty much passé. They're no longer a novelty and unless they're super-clever, users pretty much ignore them. Conversion rates have dropped through the floor and many advertisers have found other ways to push their products.
Whopping Great Banner Ad
And yet, almost every web site still contains a whopping great banner ad splashed along the top or running up the side. In part, that’s because they've become more sophisticated with better targeting and improved graphics. But in practice, banner ads tend to be used for one of two reasons: as a method of gaining / giving users through an affiliate program; or as a way of generating revenue — or traffic — through paid advertising.
Both these methods work to some extent, but the key is always to make sure the economics make sense. We'll look closely at the math in this chapter, but before we go on to talk about the math of banner ads — and how to tell whether your banner campaign is worthwhile — let’s just take a look at the terms involved. You're going to see these words whenever you join an affiliate program or take part in any other kind of on-line marketing scheme. You should definitely be familiar with them.
Business on-line, like business off-line, always boils down to math: the difference between cost and revenue. If your banner campaign is costing more than it’s earning, you won't be in business for very long. To figure out how your campaign is doing, you're going to need to know your Cost Per Mille, your Click Through Rate and your Conversion Rate. These are your basic tools. If you don't know them, find out!
As an example, let’s assume that your CPM is $20, your CTR is 1%, and your Conversion Rate is 4%. (So you're paying $20 every 1,000 times your banner is shown, it brings you 10 new users, and you make one sale for every 25 users the ad brings). The question you need to ask yourself is how much are you wasting on the 24 users who don't buy.
Cost per visitor = $20 / 10 = $2 So each visitor costs you $2, but you need 25 visitors to make one sale, so...
Cost per sale = $2 * 25 = $50 ...if your gross profit on each sale is less than $50, you're taking a loss.
That’s pretty simple, and as you can see, there’s not a lot of room to maneuver here. Margins are tight on banner advertising and that applies to both the site selling the advertising space and the webmaster buying it.
Other Measures of Success
Of course, hard cash isn't the only way to measure the success of a banner ad. One reason they're still popular is that they're a pretty effective branding tool. After all, advertisers spend millions on billboards without expecting motorists to drive straight through them and make a purchase! On the Web, those advertisers can even be reasonably sure that the people who see their ads will be interested in them. But branding costs money — lots of it — with no guarantee of results. It’s usually best left to those with really deep pockets.
My Banner Ads
I seldom use banner ads on my sites as I believe that I can better use the space for information for my readers. Those banner ads that I do use on my sites usually send users to my affiliate partners. I have not been overly impressed with the banner ads I have placed on other people’s sites and have no significant plans to use them again in the immediate future. If I could find a way to get banner ads that don't cost me anything, and I see some potential for sales occurring, I may be persuaded to change my mind *8>)
If you do decide to purchase banner advertisements though, and if you have a very specific market in mind, make sure they are strategically placed — on sites where the traffic will most definitely be interested in your product or service. Find a site that suits exactly your specific product and you're going to be appealing directly to your target market.
That’s it for this week. As you can see, banner ads are not the guaranteed money making tools that they once were but they can still be used effectively if targeted properly. Is banner advertising for you? Only you can determine that.
Talk to you soon!
P.S. I have included a bonus article on Affiliate Programs. Click Here to read it.
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