An Introduction To Online Advertising

This is a guest post by Andrew Wise of WiseStartupBlog, the blog that teaches you how to startup and sell online businesses.

So you’ve got a site, you’ve got visitors, now you need to know what to do to start making money on your site. It’s easy to get overwhelmed, so it’s important to soak up as much knowledge as possible as you try to learn how to monetize your website.

The Basics of Online Advertising

Everything revolves around 3 general dynamics, cost per click (CPC), cost per action (CPA), and cost per milli / cost per thousand (CPM).

For CPC, you are getting paid everytime someone clicks on one of your links. For CPA, you are getting paid everytime someone clicks on one of your clicks and completes an action (most likely buying something or signing up). For CPM, you are getting paid everytime someone sees the ad. It’s based on a 1,000 metric, so you have to show 1,000 ads to get paid for a single CPM.

Which Is Best For My Site?

CPA has the highest payouts, but it’s also the hardest to get good conversions on. Generally, if you have a moderate level of traffic, your best bet is to start with CPC. The most common CPC network is Adsense, and there are countless articles you should read, here are 2 to get you started:

Simple Tips To Help You Earn More Money From Adsense
My top 5 tips for increasing adsense earnings (without increasing traffic)

For those of you who are blessed to have more than 2,000 uniques per day, your cash cow is the CPM model. You can attempt to sell the ads directly, but a good way to get started is to run advertising networks.

The ad networks supply you an ad, and pay you to display the ad. The ad networks themselves strike contracts with advertisers for massive advertising purchases, and through buying in bulk, the advertiser gets a good deal, and then the ad network splits the revenue with their publisher sites (you).

Obviously since ad networks are reselling the ads, you are going to get a less amount than if you sold the ads directly, but the ad networks have relationships and bargaining power to get the big brands advertising on your site, so it’s a good relationship.

I’ve compiled the highest paying CPM ad networks for 2009 and this should give you a good idea which networks would be a good fit for an integration in your site.

One thing to note, if you are using the lesser-quality ad networks, you are going to get a lot more of the flashing, blinking, distracting, zwinky ads, so it’s important to work with an ad network that matches the level of content on your site.

Introduction to Online Advertising

Hopefully this was a good introductory course for those of you new to online advertising, and for more tips and tricks, make sure to visit my blog at WiseStartupBlog.com

Andrew Wise

About the author: Andrew Wise, VP of Business Development for Grooveshark. He shares his experiences as a 24 year old VC-backed entrepreneur at http://www.wisestartupblog.com/