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AM: Re: Sponsorship

Subject:     AM: Re: Sponsorship
From:     Raj Khera <>
Date:     Wed, 3 Jun 1998 15:20:48 -0400 (EDT)

Ted, your questions were pretty relevant so I hope you don't mind me
posting to the group rather than replying only to you.

> So if I am correct your site is not working yet?
> How did you get banner advertisers to pay you?

Actually, the site is up and running (has been for over 3 years). We
started taking advertising about 2 years ago when companies and ad
networks started calling us. We work on a CPM basis so that we can sell X
number of impressions to various advertisers based on what they want to
buy. One way to get in front of potential advertisers is to go through ad
networks and to contact ad agencies who can put you in their media plans
for their clients. Typical fees for going through ad agencies is 15%, ad
networks is 30-40% (sometimes higher) of your gross rate. So, if your rate
is $25 CPM gross and you sell 50,000 impressions, you'll get $1062.50 if
you go through an agency, or $750-875 through an ad network.  Another way
to price yourself is to provide a "net CPM" rate. This tells the agency or
network that "this is the CPM that I expect, you add your commissions on
top of that".

> And what really concerns me is how you determine sponsorship prices,
> especially if you don't have a sample of how many and who access you?
> We are about to present a business plan (we are finishing it up now) and I
> would rather have 3-4 sponsors than advertisers. I can estimate (a fairly
> accurate estimate) how many will access the site, but I don't know how to
> determine the sponsorship fees.

Setting your prices. That's the magic question. Here's how some
advertisers look at it: 

Say they've got $5000 to spend on an ad campaign for your site. If your
rate is $25 CPM and you sell them 200k impressions over a period time and
your estimated click-through rate is 1%, they're paying $2 per click. If
their ads can convert 10% of the "click throughs" into customers, they're
cost per customer is $20, which is pretty low depending on what they're

Nailing down a price is hard, especially if you don't have traffic or
demographics on your visitors. I've seen ranges from $3 CPM to $150 CPM
and higher. A common range that I've seen is $10 - $40 CPM but it really
varies a lot. 

We priced our sponsors the same way we did our regular advertisers, by
CPM.  They all want tracking reports so they can calculate their bang for
the buck.  Just so you know, when we first started selling ads on our site, we priced it at $250/month, regardless of the
number of impressions we were delivering. We also had no decent way of
tracking click throughs. As our traffic increased, we went to the CPM
model and increased our rates, having ads served by Flycast (that didn't
work out too well which is why we bought some ad serving software). 

Hope this helps.

Raj Khera
Khera Communications, Inc.
2400 Research Blvd., Suite 250
Rockville, MD  20850

Ph: 301-548-4363
Fx: 301-921-4700

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