How to Set Online Advertising Rates

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When setting online advertising rates for your website, you have to find a sweet spot. You don't want to set prices too high compared to your competitors or you'll lose business to them. However, going the opposite route and setting rates too low can also backfire by giving you too many clients or low-quality clients. Instead, your advertising rates should be competitive yet reasonable, as well as high enough to cover your business expenses.

TL;DR (Too Long; Didn't Read)

In order to set online advertising rates, you need to understand exactly what you're offering, conduct a competitor analysis and create a budget to ensure your rates cover any expenses you might incur.

Understand Your Services and Offerings

Before you can set rates, you need to understand exactly what you're offering to clients. Online advertising has become more subtle and diverse than just website banners. Different types of online advertising exist, including affiliate marketing and sponsored posts. Today, we'll talk about these particular services:

  • Displaying banner ads on your website
  • Designing and managing pay-per-click ads 
  • Running social media campaigns
  • Providing search engine optimization (SEO) services
  • Writing and distributing press releases

It makes sense to charge a fixed price for some of these services and charge by the hour for others. In addition, knowing what goes into each type of advertising service will help you conduct competitor research. For example, you don't want to compare your site-wide SEO services to a competitor who prices their services by the page.

Here's an in-depth look at these services and the factors you need to consider when setting rates for them.

Displaying Banner Advertisements on Your Website

On your website, you can have banner ads that run at the top of the page, in the sidebars, at the bottom of content or in the middle of the content. You can also potentially have pop-up banners.

Each of these spaces differs in the size of the banner it can hold, as well as how likely it is to be seen by visitors. For example, banners that appear between paragraphs in a blog require readers to be engaged enough to scroll down. On the other hand, banners that show up at the top of the page will be seen by everyone who lands on the page, regardless of what they do next.

Make a list of each of the different banner placements and their corresponding sizes that can be placed on your site. You'll assign a fixed price to each and create a banner ad pricing guide for interested clients, but first you need to do some additional research in the form of a competitor analysis.

Designing and Managing Pay-Per-Click (PPC) Ads

If you're not interested in hosting banner advertisements on your own website, you can still cash in on this popular online advertising method by designing and formatting eye-catching banners. These advertisements can even be animated and interactive, so high-quality graphic design is a must.

You can also choose to provide a full package from idea development to banner creation to campaign management. A PPC advertisement works by giving a price for each banner click. You typically set a budget so that the advertisement will not display after a certain amount of clicks have occurred.

However, choosing the best sites to place a banner ad and then analyzing the results for future campaigns can prove tricky, so companies like to entrust this task with a marketing expert. Is that you? Make a detailed list of everything you're comfortable doing for a PPC ad campaign, whether it's just a piece of the pie or the whole thing.

Running Social Media Campaigns

Social media offers a direct connection to potential customers, but it's a technique that requires forward-thinking finesse. Customers like to interact with companies, but don't like to be on the receiving end of a hard sell day in and day out. Social media represents a subtle form of online advertising.

When considering your rates for social media marketing, you'll need to make sure you can cover the cost of the tools you use to do the job. Social media management tools like HootSuite and Buffer allow you to schedule posts, analyze their performance and easily engage with followers across platforms. But they're not free. You might also find yourself hiring a graphic designer or even a professional photographer if you do not possess these skills yourself.

Think about the entire social media marketing process from start to finish and note any subscription services you'll need or freelancers you might have to hire. Document these and calculate how much money it costs you per month. Then, divide that number by the number of hours that you typically work on a social media project. Add that to your hourly rate to ensure you can still make a living while also paying off those business costs.

Providing Search Engine Optimization (SEO) Services

SEO services represent a subtle but crucial form of advertising that you don't want to miss out on. Think about what people do when looking for a product or service. Gone are the days when people flipped open the Yellow Pages. Today, it's all about Internet searches, whether typing a query into Google, Bing, Yahoo! or using voice search.

Users trust these search engines to provide accurate and worthwhile results and typically only pay attention to the top three websites that appear. There's no better way to advertise services or a store than to rank among the top three results for pertinent search queries. Virtually everyone with a website wants traffic from search engines, and providing this to them is a great way to keep your online advertising business competitive.

Start by charging an hourly rate until you develop a rhythm and know approximately how much an entire project costs. You also need to factor in the tools that you use to do the job and to track success. SEO services require skill, attention to detail and technical know-how, so don't sell yourself short on the cost. Your competitor analysis will help you understand where to start.

Writing and Distributing Press Releases

Press releases have firmly made the transition into the digital age, and thus continue to be an important element to online advertising. Just one press release can be distributed to hundreds of news outlets with the click of a button. Although that's impressive, it also means that single press release has to be extremely high-quality in order to catch the attention of those news outlets.

That's where a professional press release writing service comes into play. Your online advertising agency can write and distribute press releases for clients in order to help them gain much-needed local or national attention. And press releases can also boost a search engine optimization campaign.

The writing industry requires you to have proof of your success in the form of samples and case studies. Consider keeping your prices on the low side until you have incredible testimonials to justify higher prices. For the distribution service, you need to factor in the cost of any platforms or tools that you have to subscribe to.

Performing a Competitor Analysis

Regardless of the specific service you want to offer, determining your online advertising rates should start with a competitor analysis. Act like a prospective client and Google the services you want to offer. Try to find a company or individual with your same selling proposition in terms of experience and quality. However, look at the high-end service providers as well, especially those showing up in the top three places on Google.

If they don't explicitly list their prices, you need to dig a little deeper and contact them to ask for a quote. Just act like a client interested in their services.

Find out exactly what they offer, not only in terms of tangible results, but also in the form of reports and communication. Do they have an hourly rate or a fixed project rate? Do they expect full payment up front?

What makes them special and why would someone hire them? You need to be just as appealing, if not more so. If you offer more or fewer services than your competitors, then your price should adjust accordingly. For example, if a competitor only hosts banners but you want to host and design them, your website banner advertising rates will be more dynamic.

Finalizing Your Budget: Business Expenses

The information you obtain from a competitor analysis is just a ballpark range to inform your decisions as you set your online advertising rates. You also need to take into account any overhead expenses for running your business, such as any employees you have to hire or the office you need to rent.

Your business expenses include the online tools that help you do your job. For example, you might have costly graphic design programs that will affect your banner ad pricing guide. Or, as an SEO provider, you may need to subscribe to analytics programs that help you present progress reports to your clients.

Business expenses also take the form of accounting services and tax preparation. As a business owner, you need to be aware of how your business and your personal income will be taxed and set aside funds accordingly. Taxes will definitely affect your overall budget and thus your ad rates on websites.

Examining Your Personal Budget

After you account for your business expenses, consider your own lifestyle expenses. You have bills to pay, and if your online advertising rates don't bring in the required income, you'll have no ability to keep your business afloat. So, set a personal budget in order to determine how much profit you need to make from this venture.

Add the necessary profit in with your business expenses. It can help to look at the entire year. In other words, calculate how much you need to make personally for an entire year and add that to an entire year's worth of business expenses. Don't forget to incorporate taxes as well.

From there, you can divide the total by 12 for a monthly budget or 52 for a weekly budget. For example, if you need to make $1,000 per week to keep your business and your lifestyle afloat and you plan to work a full-time 40 hour work week, you need to charge a minimum of $25 an hour. Or, you need to have at least four clients paying a weekly sum of $250 as your website banner advertising rates.

Adjust as You Go

Remember that you can always adjust your prices. For current clients, this means signing a new contract. Or, you can keep the price the same for existing customers and charge a higher rate to new clients.

This is normal, since sometimes demand for your services can exceed your ability to provide excellence at a low rate. You may need to hire employees to break up the workload, which inevitably will affect your budget and thus your online advertising rates.

Periodically review your budget and rates and adjust them accordingly. Don't forget that people are willing to pay more for experience and high-quality services, so don't sell yourself short when you set your rates. You might be worth much more!

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About the Author

Cathy Habas specializes in marketing, customer experiences, and behind-the-scenes management. Cathy has contributed to sites like Business and Finance, Business 2 Community, and Inside Small Business. She served as the managing editor for a small content marketing agency before continuing with her writing career.