Online advertising revenue is the financial backbone of many online businesses, from personal blogs to big brands in different industries. Understanding what is ad revenue and how ad revenue work is important if you are planning to be an entrepreneur in the digital marketplace.
In this article, we will delve into how to calculate ad revenue and its benefits for online companies. The last section will also feature how a business earns income through displaying paid advertisements.
What is Ad Revenue?
Ad revenue is the money earned through the display of advertisements on websites and social media platforms. It is a monetization method gained from joining an advertising network such as Google Adsense and Mediavine and showcasing advertisements to their target audience.
Here is a list of the ad networks and who they are best for:
Google Adsense – A popular choice for a wide range of niches, and especially for newer publishers.
Mediavine – A premium ad network that will boost your online ad revenue but has 50,000 sessions per month requirement. It operates by letting advertisers bid to display ads on your platforms.
AdThrive – Best suited for established websites and publishers who have 100,000 or more monthly page views.
Ezoic – A solid choice for publishers looking to increase advertising revenue but has less traffic of around 10,000 monthly page views.
Monumetric – Great for growing publishers, it has a tiered program that begins at 10,000 monthly page views.
How is Ad Revenue Calculated?
Ad revenue is calculated based on metrics such as Cost Per Click (CPC), Cost Per Mille (CPM), and Cost Per Acquisition (CPA). These metrics look at factors such as the number of views or clicks the ad placement receives, and the engagements users did after clicking on the ad.
Understanding these metrics is crucial to knowing how to calculate your potential earnings from displaying ads.
Cost Per Click (CPC)
This metric represents the amount you earn each time a visitor clicks on an ad displayed in your platform, no matter if they purchased a product or service after clicking.
For example, if you have a CPC of $0.50 per click and your page receives 100 clicks per day, then your earnings would be $50 daily.
To increase CPC earnings make sure that the ads displayed on your pages are relevant and helpful to the visitors.
Cost Per Mille (CPM) or Revenue Per Thousand Impressions (RPM)
Also known as cost per thousand ad impressions, this metric is the amount you earn per 1000 views of the banner ads displayed on your pages.
For example, if you have a CPM of $2 and your ad receives 50,000 views, then you would earn $100.
The main difference in earnings through CPM will be heavily influenced by the ad networks you are working with. In this example, we used $2 per thousand ad impressions, but with premium ad networks such as Mediavine and AdThrive, it could go all the way to $13 – $15 or even higher.
Your niche and industry will also dictate how much an advertiser pays or is willing to invest in your ad space. It also takes time until the algorithm optimizes your ad units and native ads to increase total ad revenue.
Cost Per Acquisition (CPA)
Cost Per Acquisition or Cost Per Action, is a pricing model where advertisers pay publishers for each specified action that the user took that is connected to the advertisement. It can be in the form of clicks, form submissions, or actual sales conversions.
For example, if advertisers agree on a $3 CPA and your website receives 100 engagements or actions then your earnings would be $300 from that particular ad campaign.
To increase CPA make sure that your website offers a clear call to action elements on the page and a good user experience overall.
How Do Companies Make Money from Ad Revenue?
Companies spend a lot of time and resources to create high-quality content that users will find helpful and valuable, this boosts their income by allowing them to earn ad revenue. Website owners, bloggers, and social media managers all invest strategically in increasing ad revenue.
Here is a step-by-step process on how companies make money from ad revenue:
First, gather traffic through SEO and content marketing
Choose a suitable ad network for their niche.
Optimize ad placements
Build relationships with Advertisers
Through this method, companies and even freelancers can earn ad revenue through rewarded video ads, Google ads, or any other type of digital ads. They all will provide extra online income sources for these businesses.
Which Country has the Highest Ad Revenue?
The country with the highest ad revenue is the United States. This is because according to Statista, the United States market has the largest social media advertising expenditure with 72 billion U.S. dollars.
This is also one of the primary reasons why ad networks prefer platforms that have traffic from the US or Canada. It will naturally lead to higher ad revenue generated by businesses that have traffic from these countries.
Also, keep in mind that some prestigious network such as Mediavine and AdThrive also wants most of your traffic to belong in one or more of these countries, mainly because they are also the highest payers.
How to Increase Ad Revenue Online?
Now, if you already understand how online advertising works but want to learn how to increase your total ad revenue then here are 5 strategies that are proven to work.
1. Understanding Your Audience
You can’t display ads about lawnmowers if your page is about food and recipes. Ads are also supposed to help your visitors and users in their search queries. It has to be a complimentary element to the content of your articles, that’s why you need to understand who your target audience is.
2. Optimizing Ad Placement
There are many places where you can place your ads. Showing your users ads every paragraph will not boost your ad revenue, it will only make them hate your site and leave it immediately. You have to balance where and when you show ads.
The best way to do this is to position them every 3-5 paragraphs if it is in-text or at the side where readers can still easily digest the content of the page.
3. Leveraging Ad Formats
There are different ad formats that work best on different platforms. For example on YouTube, the best ads will be video ads because that is what users expect on a video servicing channel. In a blog post, where users read, video ads will only distract their eyes away from your content, so be sure to know how to choose the right ad format.
4. Enhancing User Experience
As mentioned above, too many ads will make the user experience negative. The same if the ads are not even slightly relevant. Also, some paid advertisements can slow down your site, affecting your search engine rankings and organic traffic. This can even result in business failure if not given a solution right after.
5. SEO and Content Optimization
To increase ad revenue you can do a lot of different methods but one will surely work, and that is to increase the number of people you are showing and displaying paid advertisements with. That is why SEO and content optimization are important, make sure that your user will find the article and post helpful. If it does not give them value then why else would they visit it and see or click your ads?
I hope this article answered your question about what is ad revenue and how it works. Remember that digital advertising and learning how to optimize your ad inventory will take some time. Placing ads is easy but earning a significant income from them is hard. Many websites will take years to reach six figures but it is totally possible. You just have to be genuine in providing valuable information and be relentless in optimizing your strategies to meet the ever-changing demands of the digital marketplace.
As a professional web and software developer, the author possesses a strong foundational background in Computer Science. This equips him with both academic rigor and practical insights into the world of web-based entrepreneurship. As the founder of this platform, webpreneurships.com, he stands at the intersection of technology and business.