As an internet startup, how do I project advertising income?
By Steve Adams
Opinions expressed by Entrepreneur contributors are their own.
How do I realistically estimate year one advertising income for a startup? What sources can I draw upon for comparison? What metrics can be used to build on income after the first year?
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.
