Online advertisement is a huge industry and creates a steady stream of revenue for both site owners and for the companies who sell the advertisements (96% of Google’s income comes from their ad buisness [1]), but is it a viable source of income for a net artist? How many views per day do you need to generate in order to become self-sustainable, void of grants, commissions, sales and working in bar?
CPM’s & CTR’s
Let’s look at the biggest and most popular online advertisement company, Google, and figure out how many views we need per month to get an average income in the US 2012, by using their Adsense service. The middle class income in the US ranges from $25.000/year – $100.000/year, let’s put our goal at the lower end of the spectrum and aim for $30.000 a year.
Google’s Adsense uses a combination of Page CTR and CPC as metrics to calculate how much you earn. Page CTR is the Click Through Rate (or Click Per Impression) of your page and it’s calculated by Page CTR = Clicks / Page views. For example if you page gets 1000 visits, and 27 of your visitors click on an ad, your CTR is 27/1000 = .027 (0.27%). The average CTR varies greatly and depends a on what industry you’re website is in and how engaging your content is. CPC stands for Cost Per Click and it’s the amount you earn per click, the price is set by the advertiser, popular keywords /search terms gets higher CPC. The web hosting and real estate industries have some of the highest CPC’s.
So to reach our goal we need to earn $2500 a month, or around $85 a day. The amount of views we need per day depends on the CPC, so let’s say that we will average a $0.5 CPC, which means we need around 170 (85/0.5) clicks per day and with an average CTR of 0.1% (that’s if every 1000th visitor clicks one ad) we need 17.000 visitors per day, 510.000 per month, or around 6.1 million a year.
The example is greatly simplified as we just assume the CPC/CTR rates, but it’s not too far off target, so then the next challenge to reach a sustainable income based on online ads is ‘How to reach 6 million visitors a year’. Let’s look at that next.