Sunday, December 25, 2011

Why is the internet covered in ads (aka How much does a website makes on ads)

More and more, I've been noticing the internet is covered in ads. While this is annoying it's parallel to the real world. Drive down any physical highway and you are assaulted with billboard ads, the information super highway (does that date me?) is just as covered.

Why is the internet covered in ads? Because it's good money. Lets work through an example, first some terms and values:


TLATermValueDefinition
CTRClick Through Rate0.3%% of times an add will be clicked
EPCEarning Per Click$0.10Average $ received when a user clicks
RPMRevenue/Thousand Impressions$3.00Amount of money you make when you show 1000 ads.

If you can show 1000 ads your website will make 3$.   This doesn't sound like much, but lets look at how much traffic some websites get.

Lets use livestrong.com, a health and wellness website, as an example.   Sites which tell you how much traffic a site gets are competealexa and google ad planner.  Compete estimates the livestrong website traffic is 6M visitors/month.   Using this figure and our above RPM, we compute a  monthly revenue of $18,000 or 216,000/year for livestrong.com all without asking their  "eyeball" customers for any money.

And this dear friends is why the internet is covered in ads. 

If you're interested in how money is made in the web, leave comments and I'll do more posts on the topic!

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