Pay per Click and other Business Models

Choosing a Business Model for In Text Ads Monetization

So, you finally decided to add double underline ads on your website. Now, you need to choose which business model would work best for you. Website monetization can be managed with partners who pay for different goals – they pay per click, per acquisition, per one thousand views, per lead, and probably per anything you can think of. For in text ads, the best business model would be pay per click, also known as PPC (and from the advertiser’s point of view – cost per click or CPC). The justifications for this model can be found in the balance of risk.

The Balance of Risk

Advertisers are on the market to promote sales. They want to sell products or services, and even when it’s merely brand awareness they seek, it eventually needs to lead to more sales. When they pay per click, they take the entire risk of converting the clicking visitor into a customer. In other models, when they pay only for a visitor that completed another action and turned into a lead by leaving his details or turned into a customer by buying something, part of the risk is allocated to the website publisher. True, they will pay more for a customer or a lead than for a click, but then the website publisher takes the risk of visitors who were not interested in their goods. Since the advertisers have all the information and tools to calculate the conversion rates and probability of sale, it makes more sense that they manage this risk. The website publisher should minimize the risk and ask for payment per click.

Minimum and Fixed eCPM

Some website publishers seek guaranteed eCPM – fixed or minimal. If it’s a fixed number, than in case the in text ads provider managed to generate higher revenues, the provider keeps the difference. If it’s a minimum eCPM, then the website publisher keeps the difference. In both cases, such a deal allocates more risk to the ads provider, because if the ads won’t yield the expected eCPM, the provider will have to pay more than he got paid for from the advertisers. Although this seems like a good deal from the publisher’s point of view, it’s not recommended.

Online advertising is a dynamic field with budgets that come and go. If you ask your provider to guarantee the eCPM, you actually push him to play it safe. This usually leads to stability, but only mediocre stability. Once the provider managed to get you that guaranteed eCPM, he will not try harder to surpass it. Also, if the provider is not able to keep the guaranteed eCPM, he will eventually ask to change the terms of the deal and stability will be replaced by continuous renegotiations.

Floor PPC

Experienced publishers who know the problems of guaranteed eCPM sometime ask for a minimal payment per click, or floor PPC. The logic behind it is that if you already lose the visitor, it won’t be for less than a certain sum. But this logic doesn’t work when the visitor simply leaves the website by closing the browser or moving on to another website. All visitors leave at some point, and if they didn’t click on an in text ad, it doesn’t mean that they will click on another type of advertising.

Moreover, not all visitors have the same value. Depending on geographic location, demographic parameters, and the highlighted term of the ad, each visitor has a different value for advertisers. When you set a floor PPC, you might in fact loose the monetization potential of certain visitors. A payment is a payment and it’s a big numbers game. Therefore, it’s wise to monitor your per-click earnings and push your provider to get it as high as possible, but it’s not recommended to limit it.

Paying for Eyeballs

Some advertising campaigns seek wide audience to build brand recognition or awareness to a certain promotion. This is very common in display ads, where banners are surrounding the content and visitors are exposed to messages sometimes even for fractions of seconds. When it’s eyeballs they want, advertisers mostly use the CPM model and pay for every 1,000 pairs of eyes who were exposed to the banner. With in text ads this is not really relevant. In text ads are hidden behind highlighted terms and visitors do not see the messages before they express interest with a hover of the mouse. When they already chose to see the message, they give much more attention than with an open banner and it should worth more. Therefore, the CPM model doesn’t work well for in text ads. Clicks do.

Revenue Share is King

The most important aspect of monetizing your website’s traffic with in text advertising is the revenue share. Combined with a PPC model, this should optimize your earnings. If you trust your provider to maximize efforts and get you the best suited advertisers, then you’d better let the provider focus on professional work. The best way for you to guarantee maximum earnings is to ask for the highest possible revenue share. If you get a 60% revenue share deal, it means that you get 60% of the payment for every click. Obviously, it would be nicer to get 70%. Then, the in text provider will do its best to get payments for every click, and the higher the better for both of you. But don’t push too hard. If you somehow managed to get a 90% revenue share deal, your provider might lose the incentive to work hard to increase your earnings, because the up side from his perspective would too low. Bottom line – look for the highest revenue share deal from a trusted pay per click provider.