Online advertising Pricing Models : Web promotion

Flat-fee Model Web advertisements are as old as the web itself. Blog monetization is quite common these days and involves various methodologies to effectively milk the real estate available on the web site. No matter what type of ad is running on your blog, each one of them follows a certain pricing model. Sometimes, you are in direct control of it, and sometimes you're not. In former case, you are in the driving seat (to some extent) deciding the best pricing model, making it a win-win situation for you as well as for the advertiser. Let's see how these pricing models affect your blog, potential advertisers and last but not the least - your blog visitors.

Flat Fee Model

It's one of the oldest pricing models for web advertisements. There is no complexity involved and price calculation is fairly simple. You charge a lump sum for a fixed period of time. This period is normally on monthly basis, though you can increase or decrease it as per your negotiations with the advertiser. When an advertiser opts for a flat fee model, he is more interested in announcing his presence rather than looking for maximum eyeballs or a sale or lead generation. In recent years, a variant of flat fee model has evolved where an advertiser demands a minimum threshold of traffic in a fixed period of time. There's a room for little deviation in the amount of traffic in this case, but if the deviation is substantial on the negative side, advertiser may not be interested in going ahead with the deal.
Flat fee model is easy to maintain from both ends (advertiser and publisher). There's no need of tracking impressions and valid clicks in this model. Despite it's simplicity, there are some drawbacks in this pricing model. Since the focus is more on time period, an advertiser may not yield expected results in the absence of any credible report about the amount of traffic an advert may receive during the period.

Traffic Based Model

Flat fee model and traffic-based model are two popular pricing models dominating the direct ad sales in blogosphere. As the name suggests, traffic based model is entirely dependent on the amount of traffic an advert will receive. A publisher charges a fixed amount for every thousand impressions an advert receives. An advertiser opts for this model, when he is interested in getting maximum eyeballs for his advertisement. This model is popularly known as CPM (cost-per-thousand impressions) model. Sometimes, the traffic is counted on visitor basis regardless of number of page impressions in his visit.
Interestingly, some of the most popular blogs offers flat-fee option for advertisers, but internally they use CPM model to calculate the price for flat-fee offers.

User Action Based Model

Developed in recent years, this pricing model dominates affiliate marketing. Here, neither time frame (theoretically) nor the amount of traffic comes into play. It's entirely dependent on how a visitor interacts with the creative (banner ad) and the steps he takes thereafter. There are two variants of this model. One is the highly popular CPC (cost-per-click) model and the other one is CPA (cost-per-action) model primarily used for affiliate marketing. Popular Adsense ads are the best example of CPC model, where a publisher is paid for every valid click.

User-action Based Model

CPA model has developed in recent years booming the affiliate marketing business. The action user takes after clicking the banner ad decides the amount to be paid to the publisher. It may be - spending a minimum time on the landing page, or signing up for a newsletter or making a purchase. Generally, the pricing for these ads is much higher as compared to CPC ads.

Here are some helpful guidelines for publishers related to web advertisements in general.

Tips for Publishers

If you own a low traffic blog, go for flat-fee model. CPM model is ideal for high traffic blogs.
If you're using electronic payment gateways, set the price such that their processing fees is included in the total amount.
Create a media kit with all the available options. (Preferably PDF format)
Create discounted options for long term deals. Don't wait for advertiser to ask about it. Include them in the media kit.
Host creatives on your own server. Preferably through an ad management service like Google Ad Manager, OIO Publisher or OpenX.
If you opt for CPM model, be ready to verify your traffic claims. You can provide read-only access to selective reports from your web analytics system.
Declare creative guidelines in media kit. (Max. size, image type - plain graphic or animated)
If possible, allow multiple payment options for potential advertisers.
Share historical (censored) data with potential advertisers to show best performing options.
Publish success stories and testimonials of existing and old clients in 'Advertise' page on your blog.
Be flexible while negotiating. Rigidity may cost you a long-term partnership.