It is really easy to decide to base your product’s business model on Advertising. However, making it happen is anything but.
The first step is understanding how this business works.This is mainly comprised in 2 main questions:
1- How is advertising quantified? Is it sold by the kilo, pound, impression, hit, click? Basically it is the question of how much advertising costs how much money.
2- What does the sales process and value chain look like? who are the decision makers? what companies are involved? what leverage do they have? This is the question that handles the steps to actually sell your advertising inventory.
How is advertising quantified
Advertising is generally quantified by how much it costs the brand to achieve the marketing campaign objective. I’m keeping it general because the objective can vary from branding, awareness, engagement to sales. All advertising media follow this rule regardless whether their performance is reported by direct analytics or by disconnected market research. However, as a rule of thumb, the more advanced the market is, the more it relies on accurate data to evaluate its ad channels.
In the digital world, it becomes more specific than this. You basically sell one of 3 things:
1- Impressions — which are sold by buckets of thousands, aka Cost per Mille (CPM).
2- Clicks — priced per single click on a Cost per Click (CPC) basis, i.e. the advertiser pays you for every click on his had that takes your user to his web-page of choice.
3- Action — price per specific action (aka CPA) that relates to the campaign in question. The action can be sales, qualified lead generation, subscription to a newsletter or anything else for that matter.
4- Views — price per view or cost per view (CPV); basically applicable only to video due to its pervasive and engaging nature, where 1 single view can be roughly (heuristically) worth 5–10x more than static impressions. This is slightly irrelevant to this article, unless you are planning to start a video publishing platform monetized by video advertisements — in other words, youtube. This I highly recommend against, and wish you the best of luck on your suicide mission, should you choose to go down this path.
5- Native Advertising/Branded Content — where you create content that adds value to the user and is sponsored by a brand or has certain products placed within it. In publishing it is called advertorials; in video production it is called… well sponsored videos :)
Prices of Ad Products
Now that we’ve pinned down “What” is sold, let’s talk a bit about how much this “What” actually costs — in ranges of course.
First of all, all prices are subject to demand, supply and purchasing power, which varies a lot with geography. Therefore, I will restrict my numbers to Egypt with some hints about the costs elsewhere.
CPMs in Egypt typically range from 5 EGP/CPM to 80 EGP/CPM. As you’ve noticed, it is a very wide range, which corresponds to the wide range of offering. Here is a bit of an explanation:
- 5 EGP — 10 EGP is the price range of (more or less non-branded) Arabic comic pages and websites (e.g. asa7by, egypt sarcasm society, forums, etc.)
- 10 EGP — 20 EGP is the price range of general and sports news websites, also in Arabic (e.g. youm7 ~10 EGP, almasryalyoum/elwatannews ~15 EGP, Shorouknews ~20–25 EGP)
- 20 EGP — 35 EGP is the price range of relatively more niche websites, like Arabic women’s websites, vertical interest websites — cars, motorcycles, hard-core technology websites, specialized medical/health, investment banking, etc (e.g. supermama, Fustany, arabhardware, etc.)
- 25 EGP — 45 EGP is the price of range English websites targeting Egypt — English news, English content, etc. This also intersects with sites that address the A-A+ class (e.g. ragel.com)
- 45 EGP+ is the price range of sites addressing the A-A+ class in terms of content, fine dining, partying, (e.g. scoopempire, cairoscene, cairozoom etc.)
Judging by the above list alone would rather drive you to develop an English website targeting the A-A+ class. But, like everything in life, nothing is quite that simple. True, if you target this segment, you will have valuable merchandise to offer advertisers. However, there is another variable at play that can break this entire unidirectional equation, which is your traffic volume.
You need to cross a certain threshold of traffic in order to be taken seriously by advertisers. Before crossing this threshold you are basically still to small for them to advertise on your platform.
The threshold is around 1–5 million impressions a month created by 350,000 to 1,000,000 unique visitors. I realize that the range is a bit wide especially for a threshold. The reason it varies so much relates directly to the type of audience you have access to. It is the same reason the CPM prices vary; i.e. the more you can offer segmented, targeted and premium audience, the higher your CPM and the lower your sell-ability-threshold and vice versa.
The same concepts apply to mobile apps, but with a relatively different set of terms and values. Here are a few pointers:
- The sell-ability-threshold is a bit lower on traffic if you are an app that does something other than present content to the people.
- Unique visitors are replaced by Active Users. And their threshold is also rather lower — somewhere around 20%–40% of their web counterparts’ values. This is due to a couple of vague and heuristic reasons/assumptions. One of them is: when the user downloads the app and is actively using, it indicates certain level of commitment and loyalty which raises the quality of the audience. Another, is that the kind of data you can provide per user is more qualified, since almost all apps require some kind of login (FB, Google, email, etc.) that enables the app owner to generate richer analytics, user behavior reporting and user segmentation.
CPC’s prices typically range from 1 EGP to 15 EGP per click — following a similar spectrum as in the CPM. However, roughly only ~5% of the ad campaigns in Egypt are CPC based while the vast majority does CPM. This goes for buyers and sellers alike — for some obscure reason that for the life of me I cannot figure out — so far.
It becomes very hard to put a price on CPA because of a lot of things, but mainly because it is very case specific, and I don’t have direct experience with this. It isn’t a mature model in Egypt yet, although the food ordering and real estate sector actually have some guidelines, where they pay a fixed amount per qualified lead (Real Estate) or pay a percentage of the order generated by your platform (Food ordering). Food ordering percentage ranges from 8% to 15% off the top.
Native Advertising & Branded Content
It is typically priced by production, i.e. price per video, per advertorial/article, per comic, per episode, per story, etc.
Here there is no fixed rule, because it really depends on what you are planning to do within the content, how much it costs you and how much it is currently worth in the market. Also, the prices vary quite quickly because the diversity of open publishing platforms (Youtube, Facebook video, medium, etc.) made it relatively easy for production firms to focus on production and push the material onto platforms with existing traffic. Therefore, part of the entry barrier was torn down.
Another important concept: Click-Through-Rate (CTR)
CTR basically measures the effectiveness of the advertising material and the channel it is placed on, i.e. your website and/or app. It is usually measured as a percentage, and is calculated by dividing the number of clicks on an ad over the number of impressions said ad generated.
It is a very long and detailed topic, so I will refer you this article instead.
Should you consider to base your product on an advertising business model, you should make sure of the following while productizing your offering:
- Know your target segment — not just know them, but can prove using analytics that you are actually capturing their attention for decent spans of time, and that they are returning users of your product.
- Know your numbers — look at them every day. Know the industry’s numbers. Know your competitors numbers albeit roughly. It’s a cut-throat game and you need to be on top of the market to succeed.
- Build enough traffic — to be advertising worthy, you need to pop up on the radar of advertisers with your numbers.
- Do your pricing homework — the numbers I’ve shared might be outdated, as said numbers change frequently. Make sure you know the whole market and that you’ve priced your stuff correctly
- Stand out, but not too much — you need to differentiate yourself somehow (by target market, by engagement, by click-through-rate, by whatever), but not to the extent that you become an odd-ball and cannot be easily and stupidly bench-marked. The Egyptian market likes what it knows after all, and that is not something you tamper with.
- Optional: Find a unique and monetizable niche — it should be unique enough to enable you to clearly and distinctly define the segment you are targeting; yet, it should be big and “important” enough to be attractive to advertising money. Content that addresses certain “rich” verticals can be interesting and full of potential, especially if said verticals don’t have much digital access to their target segment, except through you.
Finally, if you are entering the advertising realm, you must know that you are going to be competing over digital marketing budgets. This means, that you will be fighting over money to be spent on content websites, Facebook, Google Ads, Instagram, Twitter and mobile apps.
This has to be always in the back of your mind when you define your target segment and pricing, because Facebook and Google ad products in general are way cheaper than local websites.
This shall be addressed in greater detail later when tackling your next step, once you have your product ready for sale: Maneuvering the advertising value chain.
See you in the next article.
Special thanks to Abdelrahman AboSreea for pointing my attention to including CPV and CTR in the article
Special thanks to Ahmed Galal for complimenting my lack of updated numbers, and for reminding me of the gap between Facebook/Google ad prices and local networks.
Thanks to Sherry Kilany for correcting my numbers on ScoopEmpire (one of my favorite guilty pleasures by the way).