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Despite the increasing popularity of new ad types like native advertising and programmatic ads, banners are still one of the most popular forms of advertising, and they're usually the first kind a blogger tries when beginning to monetize their blog. A banner ad is basically a brand paying you to upload their image to your site. Your readers then view that image, leading to increased familiarity with the brand. Eventually, some readers will click that image or visit the brand on their own, which will lead to sales. Both you and the brand win.

… When I first started monetizing my blog, I had no idea what to charge for banner ad space. Even more frustratingly, getting a firm answer from anyone seemed impossible

However, even if you want to try banner ads, there's still the question of, how do you price them? I know when I first started monetizing my blog, I had no idea what to charge for banner ad space. Even more frustratingly, getting a firm answer from anyone seemed impossible. In retrospect, I can understand why other fashion bloggers were reluctant to reveal their rates. What you charge depends not only on your traffic but also on the economy, your niche, your popularity (word of mouth, press mentions, and social media), your SEO (do you appear in search engines for terms the brand wants to be known for?), and somewhat more vague things like fit and timing. With all those factors, how can any blogger, especially one just starting out, know what to charge?

Find the Sweet Spot

The ideal price point for banner ads is one where they're priced low enough to actually sell (ideally, you're close to sold out most all the times) but high enough to maximize your revenue, and – this is a key point – not devalue your brand. Many bloggers, especially when they're just beginning to offer ad space, undercharge. That's a problem for both you and for other bloggers. For you, undercharging may sell more ad space in the short term, but it makes it harder to actually get paid what you're worth in the long term. Undercharging also affects other bloggers by artificially lowering the going rate, and making it harder for everyone to sell ad space. In short, it's in all of our best interests for you to have a good idea of what a banner ad on your blog is worth.

There are several available methods to determine banner ad rates, but whatever method you use should be flexible enough to take into account factors like ad size (larger ads tend to cost more than smaller ads) and ad placement (ads above the fold tend to cost more than ads below the fold). Before you even begin offering ad space, I recommend either placing an affiliate ad in one of those spaces or working with a brand you like to exchange ad space for data. Knowing information like click through rates and order rates (a.k.a. purchases) will prove invaluable to your ad sale efforts, either by being an addition to your media kit or by being part of verbal talks with a brand when you're convincing them to advertise with you.

CPM, CPC & CPA

Methods for determining online advertising costs usually fall into one three categories: CPM (cost per mille or cost per 1,000 views), CPC (cost per click), and CPA (cost per action/acquisition or sale…basically, an affiliate arrangement). Today's blog post focuses on the CPM model, where a brand pays for the number of eyeballs that will see their ad in a give timeframe, not the number of people who will click the ad or the number of people who will make a purchase through the ad. In addition, this post assumes that you're selling your ad space yourself directly to brands, not going through a blog ad network or other third party.

Get Another Blogger's Media Kit

The easiest way to figure out your rates, of course, is to get a copy of another blogger's media kit (preferably a blogger the same size and in the same niche as you) and just copy their ad rates. That doesn't really teach you how to determine your own ad rates, but it can help you get started. It also provides a reference point (i.e. you'll be able to speak intelligently about what other bloggers are charging in your niche).

Start Out Simple With Formulas

A second way to figure out your ad rates is to charge $1 per 1,000 page views each month. This is the method I used when I was started advertising, and I liked it for three reasons. One, it's easy to figure out. Two, it's easy to explain. Three, it allows for natural price increases as your traffic grows. The way this method works is simple. If you're getting 25,000 page views a month, a banner ad costs $25. Some bloggers even choose to set that CPM rate at $0.75 or $1.25. It's really up to you. Ironically, as you grow, you may find yourself charging a bit less than $1.00 per 1,000. If you find yourself getting 500,000 page views per month, your particular market may not be able to support a $500 ad space.

A third and final (for this article at least) way to calculate ad rates is to take your daily visitors and divide by 10. This method works especially well if you sell short term ad space (on the order of per day or per week), as you can maximize profitability over that smaller period of time. So in this example if you're getting 800 visitors per day, your monthly ad rate would be $80 and your weekly ad rate would be $20. You've probably noticed that this method figures out to a higher monthly rate than the previous method. Please remember that one isn't necessarily better than the other; it's all about what works best for your blog.

Google Analytics

One quick word on coming up with your traffic stats. Keep in mind that not every stats program is created equal. I recommend using Google Analytics for your stats info. I've found that it's not only the most reliable, but it's also the most trustworthy (which is important if a brand asks for a screenshot to verify your numbers).

Start Making Sales!

Once you've figured out how to come up with your rates, then it's all about making sales. Some bloggers offer discounts or bonus time for longer term contracts or speedy renewals. Other bloggers offer tiered ad rates, charging less for an Etsy designer than, say, for a national or multinational corporations. Like many things, it's all about trial and error until you get it right.

What did you do to get those first ad sales? How did you determine your rates and what advice would you offer to bloggers thinking about starting banner advertising? Let's get a discussion going in the comments.