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How to Calculate and Increase Ad Revenue

by Matt Peck, on May 4, 2021 9:00:00 AM

If you've decided your website is getting enough traffic to start self-publishing ads, getting familiar with the common pricing models and knowing how to calculate your own metrics is going to play a crucial role in developing your strategy.

In this article, we'll go over the most common types of ad revenue models and how you can use the data you get from them to help increase your ad revenue.

Pricing Models

The world of online advertising seems made up of an endless list of acronyms (CTR, RPM, ATC,....). Right now we're going to focus on those most commonly used in ad pricing.

CPC: Cost per click (CPC) 

Cost per click (CPC) is exactly as it sounds. Advertisers pay a certain rate for every click their ad gets on your website.

CPC = Ad Revenue/Ad Clicks

Generally, to make the most of an advertiser paying through a CPC ad campaign, it's best to match industries and audiences. For example, if you are an automotive blog, having car ads on your website would be more effective than advertisements for home goods.

CTR: Click-Through Rate

Your click-through rate, or CTR, is the number of clicks an ad receives per impression (impression means that an ad has displayed on a user's screen, click or no click).

So an ad's CTR= (Number of clicks/Impressions) x .01

CPM: Cost Per Mille

Cost per mille, or cost per 1000, is slightly different than CPC in that advertisers pay to have their ad - per 1000 impressions - served whether it is clicked on or not.

CPM = 1,000 * (revenue / impressions)

Choosing the Right Model

Most of the time, advertisers choose between CPC and CPM models based on what they believe will be the most cost-effective, or provide the best return on ad spend (ROAS), for them.

On the publisher end, it's important to understand these metrics so you know which ads are influencing your overall yield. This way, you can better strategize and boost your ad revenue.

eCPM and Calculating Your Revenue

As a publisher, the best way you can understand the average revenue you are receiving across these different kinds of campaigns is to simply take your most recent payout, divide by the number of impressions you received over the same period, and then multiply that by 1,000.

This is what is called an eCPM, or effective cost per mille (1,000).

eCPM = (Ad Revenue/Impressions) x 1,000

So, let's say you made $5,000, with 500,000 impressions:

eCPM = (5,000/500,000) x 1,000

Your average cost across each of the ads you are publishing is then $10 for every 1,000 impressions.

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Ways to Increase Your eCPM

Now that you have a better understanding of where your money is coming from, how do you bolster your advertising revenue?

First, you should try to find ways to boost your site traffic. Simply put, more users coming to your site means more opportunities for impressions and clicks.

But there are some other easy tricks you can use to boost your numbers as well.

Pay Attention to Your Key Performance Indicators

Similar to boosting site traffic, focusing on maintaining healthy KPIs like session length and bounce rates will increase the amount of opportunities you have to serve users ad impressions.

Your bounce rates are closely tied to your advertising revenue. The more time a user spends on your site, the more ads they will be served.

Experiment with longer-form content, and make sure it's engaging, so that users spend more time on each page, allowing you to serve them more ads.

On top of this, track which kind of content is producing the best KPIs, and focus on creating similar posts for your audience.

Know Your Audience

The advertising on your website should go hand-in-hand with the kind of content you produce. For example, if you have a popular beauty website, advertising air conditioner repair groups may not yield the best eCPM.

Instead, pay attention to what your customers' interests are. Learn what kinds of ads they click on the most and what their favorite content is on your site.

By better tailoring your ads, which you can do with many of the settings on the platforms you pull ads from, you will increase CTRs and your overall payout.

Advertisers will often pay a premium to publish ads on sites that share the same target audience, so don't be afraid to share your data with them.

Also, understanding which demand partners will be the best fit for you will go a long way in making sure you are bringing demand to your visitors that will keep them coming back.

Keep an Eye On Your Ad Performance

Take the time to explore the front side of your site to make sure ads are performing correctly and aren't damaging the user experience.

Some things to focus on include page load speeds and malicious advertisements. If your site is behaving slowly, or is getting ads that are harming your visitors’ experience, it's likely that you're sending frustrated users away from your site and cutting into your CPM rates and revenue.

Another thing to consider is how effective your ad space and refresh rates are. If you find that a certain ad placement or ad format is not bringing in the clicks you expected, try and experiment with something new.

Along with this, if users are expected to stay on a certain portion of your site with high ad viewability, experimenting with refresh rates to get multiple views of an ad unit can be an effective technique to boost revenue.

Use Your ads.txt File

This file details exactly which partners you have providing you with demand (from SSPs to DSPs). It's a way of controlling the demand coming into your ad units and keeping it as fitting to your audience as possible (as well as avoiding platforms known for delivering poor quality creative).

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Don't Bombard (Keep Your Ad Experience Clean and Unobtrusive)

At first thought, filling your page wall to wall with ads may seem like an effective way to rake in ad revenue. But in reality, this is more likely to hurt you than help you.

Optimizing the number of ads your audience is served is important to developing healthy ad revenue, but site retention and customer loyalty are a far more effective way of achieving this.

Blasting visitors with ads will more likely lead to them leaving your site, and may even lead them to install an ad-blocker. Once that trust is broken, it may be difficult to win back.

Take the time to create a tolerable ad experience on your site so users will stick around.

Wrapping Up

Ultimately, the lower any of these key metrics and the less optimized your site is, the more the demand side algorithms will divert supply away from your site and the less likely direct buy partners will be to do business with you.

Paying close attention and focusing on providing the best ad experience possible is the best place to start when trying to boost your eCPMS and overall yield.

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