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AM: Ad/Store rates

To:     ad-market
Subject:     AM: Ad/Store rates
From:     bleriot@ix.netcom.com
Date:     Wed, 3 Jun 1998 12:38:55 -0400

Amy writes:

> 1. One vendor I have asked to be in the store is willing to give me all
> their graphics and goodies for the storefront and in return, VA will get 12% of
> each sale.  Since the site is new (well, not even live yet) we will also get the
> extra benefit of having their good name on our site.  Intially, if vendors
> have the material to give VA then I see only asking for a small set up
> charge for time.   But, if  VA has to do all the set up and design for another
> vendor, then I will charge and have a fee for that based on design &
> programming. So far it seems easy.  But, would you suggest a monthly leasing
> fee as well? What about the first vendors who are willing to risk with me?  
> Initially, I was going to charge $500 per month to lease the space but am beginning 
> to think that maybe for now the commission on sales should suffice.  Thoughts?

I think $500/month is reasonable on a startup basis - but this should 
also depend upon the space occupied, the prominance and visibility of the 
vendor's brand name, Icon, products, etc.  Think shelf space. Once 
traffic grows, the lease for new vendors should be higher - $2500 to 
$5000.  I would always have a minimum monthly payment for "real estate" 
and then an additional commission.  You'll need the minimums to pay the 
bills in the early months before traffic builds.   

> 2. This same vendor asked me about our ad pricing.  Hmm. Here is my
> challenge. In my business plan I calculated offering a minimal 0.50 per cpm 
> right off the bat.  But, since the site is not live yet, I am not sure what to say 
> about pricing.  While I have some great market research saying that people 
> will use this site,  I cannot guarantee anything yet.   My thought now is to offer
> free advertising for the first month the site is live and then 0.50 + as the
> site grows.   

The CPM should reflect the quality of the audience you anticipate 
capturing.  Don't know where you read $0.05 CPM, but that is way too low. 
On an impression-based buy the CPM for a targeted audience (which this 
should be - it is afterall a self selecting audience of atheltic apparel 
buyers) should be $25 - $35, at the very least.  

Do try to avoid "click-through" pricing or "per-inquiry" pricing as this 
could net you a fifty-cent CPM, but is not the appropriate model for your
site.  What the advertising buyer is seeking is audience and environment 
and this means an impression-priced buy. Free for the first month is ok, but
I would make the free first month contingent upon a minimum 12 (or at 
least 6) months agreement. 

Terry

-------------
Terry Pittman
General Manager
Online Advertising & eCommerce
Netcom Online Communications, Inc.
2010 Corporate Ridge Suite 700
McLean, VA 22102



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