How to Price Listings, Banners & More

We received an interesting question inquiring as to the best way to price a listing.

The poster expressed that there should be several components taken into consideration when considering how to price a sponsored listing, such as:

• yearly wages
• bandwidth
• storage
• monthly views
• listing views
• profit
• growth money
• advertising

First, let me voice that there is no one correct way to price your listings and there’s no one standard or uniform equation to pricing out your listings.

In my experience, having dealt with hundreds of our clients and also having experience in the publishing industry, your pricing model should be competitive to your market specifically. The price of a diamond level listing on a biotech or pharmaceutical directory where sponsors include multi billion dollar companies like Amgen or Genentech is going to be drastically different than a diamond level listing on a local search site in Fargo ND.

Look at the advertisers you’re looking to attract and find out where they are advertising. These are likely your direct or somewhat direct competitors. They’ve set a market rate for these businesses and established a standard upon which they’re used to paying. This is your best guide to determining the right pricing model for your site.

One thing to keep in mind are the differences in print and online competitors. A 1/2 page ad in a print publication that boasts a circulation of 15,000 is drastically different than a 728×89 leaderboard with 15,000 impressions.

One thing I encourage all of our clients to do is to focus on maintaining the value of your sponsorships. Here’s an example:

Let’s say you’re working on bringing on a new client and quote them $100 a month for a feature (diamond) listing. At that time, maybe you’re getting 10,000 pageviews a month on your site. $10 CPM isn’t that bad. Now let’s say 6 months down the road he comes back to you to purchase the advertising — or perhaps even renew his existing contract with you. The price he last saw was $100 a month for 10,0000 pageviews.

Now your site has reached 30,000 pageviews and you’re charging $200. You’ve tripled the traffic to your site and only doubled the cost of your sponsorship and your CPM is down to $6.66. At the end of the day, you’ve created a most cost effective advertising vehicle for your sponsor, but him justifying a 2x increase in ad spend from what it was last time can be very difficult, despite the substantial increase in audience size. So what to do in these situations?

Price your ad units at competitive or slightly above competitive lines out of the gate. If you had come in at a $200 price point with 10,000 pageviews ($20CPM), it may be a little steep, but you can ALWAYS have value ads in the deal with your advertiser, such as buy 4 months and get a 5th free to make the cost sting a little less. This way, your sponsorships (listings, banners, etc) maintain their value ($200 a month) and you don’t have to worry about constantly increasing your costs to reflect the growth in your site traffic.

Many marketers can understand and justify the price increase above, but in many cases, when you’re running a local search site, you’re not dealing with savvy marketers, you’re dealing with small business owners who are trying to keep their operational costs tight. Some things to remind them of when trying to re-inforce the value of your site’s sponsorships:
-Guaranteed impressions. In their print publication ,they’re sold a circulation number, but this by no means reflects how many people actually read the publication or saw your ad for that matter.
-Relevance. Use Analytics information (search terms, time on site) to SHOW your advertiser that people come to your site to FIND businesses like theirs.
-Reporting – Providing your advertiser with a detailed report on how many pageviews their ad got, how long the average visitor stayed on site, what they were searching for when they came to the site, how many people clicked on their listing, redeemed a deal, etc.

Questions? Comments? Thoughts? leave them in the comments section.