Shimon Sandler

How to Evaluate Ad Revenue Potential

If you own a website, and want to serve ads using a 3rd party ad server, then here is a method to calculate the Ad Revenue Potential.

Either use your own Web Analytics or use Compete to discover the Visitor and Page View metrics.

Method #1 to Calculate Ad Revenue Potential:

Let’s say there are 5 ads/page. Add up the total of ads on page.
Ad1=$7.00 CPM (728 x 90 Leaderboard)
Ad2=$5.00 CPM (120 x 600 Skyscraper)
Ad3=$3.50 CPM (125 x 125 Square Button)
Ad4=$3.50 CPM (125 x 125 Square Button)
Ad5=$3.50 CPM (125 x 125 Square Button)

The Total Ad Revenue on each page is: $22.50 CPM

Let’s say there are 20,000 Visits/Month, and each visitor has 7 Page Views per Visit. Thats 20,000 x 7 = 140,000 Page Views. 140,000 x 5 Ads = 700,000 Impressions.

The formula is: CPM x Impressions / 1000 = Ad Revenue
$22.50 CPM x 700,000 Impressions = 15,750,000. So, 15,750,000 / 1000 = $15,750.

Method #2 (Simple Method) to Calculate Ad Revenue potential:
Total PageViews (1,000,000) x Ads on page (5)= Total Impressions (5,000,000)
Avg CPM = $4
So, in our scenerio…..
5,000,000/1000 = 5,000 x $4 Avg CPM = $20,000 Ad Revenue Potential.

Remember to abide by the IAB Rules – Terms & Conditions.

Bonus:
Here’s a formula to calculate what CPM to charge to generate a Desired Ad Revenue:
Desired Ad Revenue / Impressions = CPM to charge
Eg: $20,000/5,000,000 = $4.00 CPM.

Naturally, the smart marketer will look for ways to increase Engagement (Page Views), and Traffic (Visitors).

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Comments

  1. In method one you add all the ads on one page to get the 22.50$ CPM and then you calculate 140,000 page views. Why do you multiply again the page views by 5 for 5 ads unit, since it’s already factored in the CPM of 22.50$. Or I am missing something? This would give revenues of 3150$ instead.

  2. The $22.50 is the revenue from the combined 5 ads.

    So, if there are 20,000 Visits/Month, and each visitor has 7 Page Views per Visit. Thats 20,000 x 7 = 140,000 Page Views.

    140,000 x 5 Ads = 700,000 Ad Impressions.

    $22.50 CPM x 700,000 Impressions = 15,750,000.
    So, 15,750,000 / 1000 = $15,750.

  3. BullJustin says:

    Since you are using the total CPM of the first example you need not multiply by the number of ads on the page. The formulas you provide all give different answers when you use the same numbers so they cannot be correct. the correct formulas should be:

    (Users * Pages/user * Ads/page * Average CPM) / 1000 = Total Revenue

    AND

    Total Desired Revenue * 1000 / (Users * Pages/user * Ads/page) = Average CPM

  4. Shimon – are you right or not? I like how you just don’t respond lol.

  5. Shimon – the numbers you’ve shown seem huge to me! $5 average for 1000 impressions? I thought it was in cents for 1000 impressions. I’ve no experience in online advertising, so correct me if I’m wrong, and I’d love to know, where you can find these authentic numbers?

    Thanks.

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