Find out how much to charge for ad space on your blog. Spoiler alert: there is a mathematical foundation behind it that even the most skeptical marketers can get behind.
Pricing is an art and a science that brands devote countless resources to, and are constantly re-evaluating their conclusions. There are entire departments dedicated just to the psychology behind shopper’s reactions to prices.
When it comes to pricing ad space on your blog, settle in for a lot of trial and error. The web is full of complicated, non-specific suggestions ranging from “Between $20 and $21.73 per ad” to “1 cent for every visitor” and my personal favorite “your household budget divided by the number of ad spaces on your page”.
I’m not kidding. I actually read a post that suggested you use your household budget as the foundation for your blog’s pricing. Imagine that conversation please.
Marketer: “What data are you using as the foundation of your pricing structure? Is it click through rate?”
Blogger: “No it’s my household budget. Little joey needed a new tuba for chorus, so the prices are a little high this month.”
Full disclosure, pricing is a very personal subject that depends deeply on the community you have built. However…there is more science to it than a lot of these….I’m just going to say it…ridiculous suggestions.
The point I’m trying to make here, is that there is no one right answer to the question “how much should I charge for ad space?”.
Be prepared to experiment with your prices and learn by trial and error (or you can hire me and save a buncha time and money.). You need to balance your actual value to your client with your personal worth. You put a lot of time and effort into your blog, and as long as your posting content consistently and working to grow your readership, your blog is probably worth more than $100 per month.
— Olivia Derby (@OliviaRDerby) June 13, 2016
Although you should be approaching this topic with an adventurous spirit, I do have a little bit of direction for you.
The companies that work with you have 1 goal they hope to achieve by purchasing ad space. They wanna make sales. They obviously are interested in making enough money to cover their investment (the amount you charged them for ad space) plus some.
So try this equation out to give you an idea of what to charge.
Find your conversion rate
(Number of visitors per month to your site*.01)*X= Your estimated conversion rate
The “X” is a variable based on your niche.
For fashion and beauty bloggers X= 2
For gardening and DIY X=1.2
For blogging and business X=1.8
For travel X=.4
For food and baking X=2.5
For spiritual and faith based blogs =1.4
(If your niche isn’t covered, comment below with your category and I’ll do my best to dig up your X)
(5,000 Visitors per month*.01) = 50
50*2 for a fashion and beauty blog =100
We will call this number our “Conversion Total”.
This number represents the expected number of clicks on your ad. It also represents the last step in the purchase process which you can influence. You’ve done your job and gotten people to click on the ad, bringing them to the advertiser’s landing page. From here, it’s up to the advertiser to use good design, content, and follow up to get people to purchase.
This is also the number you would share with your clients as your goal (if they ask).
To find your customized conversion rate use the following equation.
Total traffic to your site over 1 month/(sum of clicks on all sidebar ads/number of sidebar ads)=Custom conversion rate.
Ex. 5,000 total site visits over a month/(2,100 total sidebar clicks/3 sidebar ads)= 7.14% of your visitors click on your ads.
Also note the 300 average clicks per ad that were indicated by the 2,100 total clicks/3 sidebar ads will serve as your Conversion Total.
Estimate the number of purchases
To find a price to start with, you need to figure out about how many of the people who click the ad will actually make a purchase. This part is quite hard to estimate for someone else’s website.
However, it’s pretty safe to assume the lowest common denominator here is about 2%.
Conversion Total*2%=Estimated Number of Purchases
Ex. Keeping with our fashion and beauty blog example…
100*.02=2 sales from your site.
Assign a product value
If you’re working with an advertiser who is selling one specific product this part will be easy. If not, you might need to spend a little time on their site looking for popular products.
You are looking for a product price which represents the average amount a shopper pays to your client. Call this the product value.
Sales from your site*product value=Return on Investment for you Client
Most women, however, are looking to standardize their pricing. That means they want to have one set price they can quote to all companies, large or small. This makes sense, because like I said before, you’re really only responsible for the clicks on the ad. After that it’s up to your client to actually convince people to buy.
To settle on a standardized price you will need an average basket price that represents the industry in which you blog. This varies wildly, but according to Statista the average online order value placed on a desktop device over the last 4 years was about 75.9USD.
According to Statista the average order value placed on a desktop device over the last 4 years was about 75.9USD https://t.co/G9AEBgvivG
— Olivia Derby (@OliviaRDerby) June 13, 2016
So, if we plug in this data into our Return On Investment (ROI) equation, we can estimate the average revenue your site could generate for an advertiser.
Ex. 2 sales from your site*75.9=$151.8
According to our earlier example with the fashion and beauty blog, the advertiser could expect to make about $151.80.
What makes buying ad space worth it?
We know advertisers want to make their money back with sales from your site, but that’s not all they want. They are looking at you like an investment.
At a minimum you should be striving to return at least 30% more than they paid you for the ad and more like 100% more if you’re looking for reliable repeat business.
If we take assume an average return of 50%, we can work backwards to find out what we should be charging for the ad.
100% (the cost of the ad) +50%(the amount of return for the advertiser) =150%
150%/50% (the amount of return for the advertiser) = 3
(Total sales from your site/3)*2= the total cost of your ad
Ex. ($151.80 (sales from your site)/3)*2= $101.20 Total cost of the ad
Who cares about these numbers?
Marketers. Marketers care about these numbers. Any brand who is looking to advertise with you will want to know with as much certainty as possible, that you will be a good investment. Even if they are only spending $101.20 to work with you.
Include your total monthly visitors, your estimated conversion rate, the estimated return on investment for your customer, and the total cost of your ad space in your media kit.
I know many bloggers who even include the equation in their media kit so that there is no question about their expectations from advertisers.
Now go get your media kit together and start selling some ad space!