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 Profitability!
Either use your own Web Analytics’s or use Compete to discover the Visitor and Page View metrics.
Method #1 to Calculate Ad Revenue Potential:
Let’s say there is 5 ads/page. Add up the total of ads on page.
Ad1=$7.00 CPM (728 x 90 Leader board)
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. That’s 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 Page Views (1,000,000) x Ads on page (5)= Total Impressions (5,000,000)
Avg CPM = $4
So, in our scenario…..
5,000,000/1000 = 5,000 x $4 Avg CPM = $20,000 Ad Revenue Potential.
Remember to abide by the IAB Rules – Terms & Conditions.
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).