WHY DO ADS PAY DIFFERENT AMOUNTS?

When we as publishers put ads on our site, we do so with the expectation of being compensated. We don’t put ads on a page just for fun. We do it to get paid! But as most publishers know, all ads are not created equal. Ads pay very different amounts, from only a few cents to over twenty dollars each. The average display ad sells for around $0.19 CPM while a good pre-roll video campaign will sell for as much as $25.00 CPM. Why do some ads pay a little but others pay a lot?

There are a number of reasons why ads pay different rates. The ad type, viewability, and aggressiveness all impact how much an ad pays. A publisher’s website layout and traffic can influence how much advertisers are willing to pay for those ads. The metric an advertiser uses to determine how they pay a publisher also makes an impact. Obviously there a lot of factors that will impact how much money you’ll receive from any one ad. We’ll talk about each of these in more detail in this section.

First, the type of ad makes a huge difference in how much ads pay. A standard display ad sits on the page, away from the content. The click-through rate (CTR) on these is generally lowest because readers don’t notice them as much. Display ads use the least advanced tech and result in fewer clicks. Because of this, these ads pay lower amounts. Advertisers aren’t willing to spend a lot of money to have an ad go unseen or un-clicked, so display ads are considered to be the most inexpensive ad type.

Ads that grab a reader’s attention generally pay more. For example, a video ad is more noticeable than a static display ad. A video is more noticeable than a still image, so the video ad pays more. An interstitial does a great job at grabbing your reader’s attention because the ad covers the reader’s screen. An advertiser knows that at least for a moment, the user definitely saw the ad. The bigger the attention grab, the more an ad will pay.

Viewability also makes an impact on how much advertisers are willing to pay for an ad. If an ad is viewable to a reader for a long period of time, the ad pays more. On the other hand, if it’s only visible for a fraction of a second while a reader is scrolling, or isn’t visible at all, then the ad won’t pay very much. In-image and In-line ads have high viewability because the ads are located right in the content. In-image ads are clearly visible on the images readers are looking at. In-line ads are in a break between content, so as visitors read down the page their eyes will automatically read over the advertisement.

Ads that pay the best are usually designed to grab a reader’s attention and have high viewability. An example of this is a rich media ad. These ads move up or down the page so they quickly grab the reader’s attention. Because it’s moving to stay in the line of sight of the reader, these ads also have high viewability. The combination of high viewability with a strong attention grab results in a higher paying ad.

Obviously, there are pros and cons to different types of ads. Basic display ads are less of a distraction to your readers, but they also pay less. Rich media ads pay more, but they are more aggressive. Choosing what types of ads to allow on your site is all about creating a healthy balance. As a publisher, seeing advertisements is the price your reader pays for access to your valuable content. But at the same time, you don’t want to ruin your reader’s experience by covering your entire site with ads.

The way advertisers measure the success of an ad campaign also plays a role in how much each ad pays. Advertisers are willing to pay more when they are more confident that the advertising campaign will be profitable. Essentially, they want to earn more money than they spent on ads. Advertisers are also willing to pay more when it is easier for them to track that return on investment. Most ads are sold 4 different ways, either based on CPM, CPC, CPA, or vCPM:

CPM – Cost Per Mil. These types of ads are sold at a flat rate for every 1,000 impressions. The ads cost that flat rate regardless of the click rate. So as a publisher, you get paid for these ads whether or not they’re clicked on. As long as the creative is displayed on your page, you’ll get paid. Display ads are usually sold this way. CPM rates are relatively inexpensive to the advertiser. It provides the advertiser with peace of mind because they know exactly how much they will spend on an advertising campaign. The downside for advertisers is that if no one clicks on the ad, they won’t get any return on their investment. Advertisers bear some risk with CPMs because they have to pay for the ad regardless of how it performs. Because of this risk, advertisers pay the lowest amounts for CPMs.

CPC – Cost Per Click (also known as Pay Per Click). Advertisers only pay for CPCs when a reader actually clicks on the ad. A reader could see the ad, but if they don’t actually click on it, the advertiser doesn’t pay anything. This reduces risk for the advertiser but isn’t always good for the publisher. If no one ever clicks on the ad, the publisher won’t ever be paid. Because there is some risk involved on the publisher’s side, these ads pay more than CPMs. Advertisers also like these ads because it is very easy to track the number of clicks on one ad.

CPA – Cost Per Acquisition. With CPAs, advertisers only pay per lead generated. A lead is a prospective customer. Essentially, these ads only pay when the advertiser gains a new customer because of an ad. This means that not only does a viewer have to click on your ad, but they also have to purchase the product or service. This is great for the advertiser because they can easily determine how much money they need to spend in order to gain a new customer. Similar to CPCs, publishers bear the risk for these ads because if the advertiser never gains a new customer, the publisher will not be paid. CPAs pay more than CPCs or CPMs.

vCPM – Viewable Cost Per Mil. A vCPM campaign will only pay out when the ads are served and measured as viewable. Viewability is becoming more and more important as advertisers have realized that some ads are never seen. vCPM is a fairly new metric but will be used more as viewability is tracked more consistently. Advertisers don’t want to pay for ads that are never seen, so vCPM is a better overall measurement for advertisers than CPM. It’s possible that as viewability tracking increases, vCPM will eventually replace CPM as the base metric.

As a publisher, managing ads is all about understanding your site. Depending on your type of traffic, certain ads may do better than other types of ads. Display ads don’t pay the most, but if you have a lot of traffic with a high click-through rate, you may do well with just display ads on your site. It’s also about managing risk. Rich media ads may pay more, but they also need to have a frequency cap so they don’t turn off your readers. Display ads pay less but you can easily have several of those on your site at once.

You need to know your reader, know your traffic, and know how you want your site to look. Understanding your goals as a website owner and the relationship you have with your reader is most important. These should be the things you look at when you decide how you want to monetize your site, not by just choosing whatever pays the most.

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