As a consultant to tech startups, I’ve seen entrepreneurs planning online ventures confused when it comes to projecting advertising revenue. Having done ad projections with the benefit of live models from which to extract real data, I offer the following guidelines on how you can calculate revenue projections for your business plan.
Baseline Criteria:Let’s assume that for Year One you will only use third-party ad-serving networks, instead of direct selling. This is as simple as adding their code snippets to your pages, to automatically feed their ads to your site.
Because it’s rare to find one service that can fill all your inventory, I recommend a primary service and a backup service. I also like to use a combination of two ad types: CPM (revenue earned per 1, 000 ad views) and CPC (revenue earned per click). For the sake of these sample projections, however, we’ll focus solely on CPMs, as it’s easier to calculate.
In terms of ad providers, I’ve used Contextweb for CPM and Google AdSense for CPC. There are plenty of others to consider, but you may have to qualify for their minimum page view requirements, and that may not come until later.
Year One Assumptions:
- 2 CPM ad slots per page
- 80% of your inventory filled (a common percentage with a 2-service approach)
- $1.20 earned per 1, 000 pages viewed
You start by projecting monthly page views. Hopefully you have a beta site or some similar sites where you can review the average page views per visitor. If not, Compete.com will let you compare the number of monthly visitors for similar sites.
Depending on the type of site content, pages per visit can generally average as low as 2.5 to 3 pages per new visitor and between 8 to 10 pages for a repeat visitor. These numbers are based purely on my own experience managing sites.