Banner Ad Price Evaluation

Understanding Banner Ad Pricing

Let's say that a publisher wants people to buy a mobile, and hopes to increase sales of the mobile through advertising. The publisher has budgeted $3 per mobile for a particular brand to spend on advertising. If the publisher is paying $30 per 1,000 impressions for banner ads and purchases 100,000 impressions for $3,000, here is what happens:

• The banner ad appears 100,000 times.



• Let's say the response rate is 10 clicks per 1,000 impressions, so 1000 people click on the ad during the time the 100,000 total impressions are running.



• If two percent of those 1000 people actually purchase the particular brand mobile, that results in 20 purchases.



• The publisher had to pay ($3,000/20) $150 for each mobile purchased through that ad.

­ Obviously, paying $150 to sell one mobile is not a good economic model for a publisher, especially since the budget is $3 per mobile.

Conclusion

For banner advertising to work for the publisher, the publisher would need to pay 30 cents per 1,000 impressions, rather than 30 dollars, which is the traditional method. Check out the next post to understand the modern pricing strategy...