How much Money can I earn with In Text ads on my Website? Part 1

Calculating Potential In Text Ads Revenues

This is the most frequent question I get from website publishers before they integrate in-text ads for the first time. Fine, they say, we understand that they’re fast, relevant, subtle, don’t take place or require changes, but from the monetization point of view – how much can we earn from in-text ads? I wish I could answer this with a number, for example, $12,430 per month, but it’s not that simple. I can answer, however, with some rules and a simple formula to calculate your website’s potential in-text revenues. It would take some basic terminology clarifications and some further analysis, but bear with me, and I promise a formula you can easily use.

Breaking Down eCPM

Most often, online revenues are measured in eCPM – effective Cost Per Mille (thousand) is the original term, and as expected, it can be highly misleading, so let’s linger with it for a paragraph. This acronym simply stands for your bottom line revenues divided by your relevant page views, and then divided by 1,000, all in the relevant currency. Why divided by 1,000, you ask? Because the actual number was too low. Dividing the page views helped making the number higher and this way more comfortable, but also much more confusing…

For example, if your website had yesterday 20,000 relevant page views and yielded $100, your eCPM was $100 / (20,000 / 1,000) = $5. If you keep a stable average eCPM of $5 and stable traffic of average 20,000 page views daily, your website has a potential of $3,000 monthly revenues (this is by multiplying $5 by your monthly page views divided by 1,000). So why is calculating the potential revenues so complicated? Because every one of these eCPM factors can vary widely according to your website’s circumstances.

Start with Impressions, Net Impressions

You know how many page views your website gets every day. Most likely, you use Google Analytics or another web analytics service or software; you may even be analyzing the hits on your servers. But this number will be different than the page views counted by your ads provider. Why? Notice that when calculating eCPM, we used the term “relevant page views”, also known as “impressions”. As the term implies, impressions are incidents when a visitor was exposed to the ads. Not all page views actually manage presenting ads to the visitor and therefore not all them are counted as impressions.

The ratio between these relevant impressions (or net impressions) and the actual number of page views is sometimes called “fill rate”, so that if you had 100,000 page views, but only 70,000 of them were net impressions, the fill rate was 70%. Since the higher the number of impressions, the higher the eCPM, then clearly you should aim for a high fill rate.

Where did my Impressions Go? Abroad!

What decreases the fill rate? Where do those precious page views go with your money? Your ads provider won’t count pages that didn’t have ads on them. A legitimate reason can be that the visitor left so fast, that the hit on the server occurred, but the page didn’t complete to load all content and advertising scripts. Another reason can be that the page wasn’t suitable for the ads – it may have had too little text to actually highlight in-text ads or the content could have been in breach of terms (for instance, included adult oriented content where this was prohibited by the provider). All this happens and explains why fill rate are never 100%. Some page views are not actual net impressions.

The main reason for loss of page views, however, lies elsewhere, in geography. When advertisers purchase online campaigns they use geo-targeting, to determine where they want their ads to show up; this can be set according to the IP address mapping. Your in-text ads provider may not serve ads for certain locations – cities, areas, countries, and even whole continents. In such cases, page views from such locations where the provider didn’t show ads will not be counted as part of your relevant page views, or impressions, and will not be paid for.

International Visitors could lead to Lost Revenues

To show how this geo-filtering can substantially affect your earnings, let’s continue with the same example but this time assume that out of the 100,000 page views, 40,000 were from the US while 60,000 were from Australia and Malaysia; and assume that your in-text provider doesn’t serve ads for visitors from Australia and Malaysia. In such case, your net impressions will be only 40,000 (40% fill rate) and you will earn only 40 times $5 = $200, instead of 100 times $5 = $500.

When your provider reports calculate eCPM, you will see $200 divided by 40,000, divided by 1,000, which equals $5, so it would seem as if you have a relatively high eCPM of $5 as you expected. But if you calculate your actual eCPM with your real number page views, it will look grim: $200 divided by 100,000, divided by 1,000, which equals only $2 eCPM. This shows how comparing eCPM figures without analysis could be deceiving.

Look for the Bottom Line Revenues

Since eCPM can hide parts of the big picture, I recommend measuring your website revenues by the bottom line, in dollars (or your relevant currency). Don’t focus on eCPM only.

Look for an in-text ads solution that counts most of your traffic. While it is legitimate to filter out page views from areas with no ads, this is often stretched way too far to disqualify any visitor who is not from the USA. Such over-filtering will artificially increase your eCPM, but will also lower your bottom line revenues.

In the example above, if you’d managed increasing the fill rate from 40% to 70%, by finding a provider or a deal that does serve ads to international visitors and count your international traffic, your eCPM will seem to be lower, since the per-click payment in such locations is usually lower, but your bottom line revenues will be higher.

Hmmm… so the per-click payment (PPC) matters too? Of course. All parameters count. The eCPM, Net Impressions, CPC, CTR… Optimizing your website’s monetization takes some work, but this work pays off and at the end of the day, it helps you keep your visitors happy with better content and user experience. I will continue this discussion until getting to a formula that lets you calculate how much your website can earn you with in text ads. Next part will be about clicks…!