As an internet startup, how do I project advertising income?
Join us at Entrepreneur magazine's Growth Conference, Dec. 15 in Long Beach, Calif. for a day of fresh ideas, business mentoring and networking. Register here for exclusive pricing, available only for a limited time.
Forecasting revenues is tough at any time, and so much harder for startups. Rather than trying to find a precise number, it's often easier to develop a range--bookends of high and low projections.
Web advertising is typically paid for in one of two ways:
* Impression (CPM ) based: Advertisers pay to have their ads shown to your visitors, and pay per impression. The CPM (cost-per-thousand impressions) varies dramatically depending on the value of your audience; it can range from pennies to hundreds of dollars or more for niche audience.
* Performance (CPA) based: Advertisers pay only when a site visitor completes an action (fills in a form, purchases, etc.)
A revenue model for impression-based advertising would look like:
# ads per page * # pageviews * CPM
A revenue model for performance-based advertising would look like:
# ads per page * # pageviews * (% that take action) * CPA
Obviously you make more if you have more ads, but at the risk of driving away your visitors.
The common element is that if you have a lot of good quality traffic then advertisers will be more interested.