Things To Know About Making Money From Paid Advertising

Before you start making money from paid advertising on your blog or website, there are certain things you need to know so that you won’t break any rules set by the advertising network and so that you can decide what’s the best monetization method for your site.

The Concept:

Making money from paid advertising is like selling advertisement space on a newspaper. The larger your newspaper circulation, the more the advertising space is worth. The same concept applies in internet advertising, the more pageviews and visitors your site gets, the more valuable advertisement space on your site is. Advertisers wants to draw people to their products or services, while publishers (bloggers, website owners)are the ones who help the advertisers advertise their advertisements by putting up the advertisements on their webpage. The advertising network on the other hand is the one that connects the advertisers with the publishers. Advertising networks take a percentage of the publishers earnings, that’s how they make money. Of course you can take away the middleman (advertising networks) and find a publisher on your own to keep all of your earnings, but most webmasters and bloggers let the advertising networks to do the dirty work.

Terms You Need To Know:

Cost per click (CPC) - If you’re a publisher, the cost per click (CPC) of an advertisement is the amount of money you earn for every click on the advertisement on your site. If you’re an advertiser, the cost per click (CPC) is the amount you pay for every click on your advertisement.
Cost per mile (CPM) - Mile in Latin means thousands, therefore cost per mile carries the same meaning as cost per thousand (CPT). If you’re a publisher, the cost per mile (CPM) of an advertisement means the amount of money you would earn for every thousand times the advertisement is shown. If you’re an advertiser, the cost per mile (CPM) of an advertisement means the amount of money you pay for every thousand impressions on your advertisement.
Cost per thousand (CPT) - Carries the same meaning as cost per mile (CPM)
Cost per impression (CPI) - Cost per impression (CPI) is commonly used by publishers to determine how much money they can earn per impression for cost per mile (CPM) and cost per thousand (CPT) advertisements . To determine the cost per impression (CPI), you divide the CPM or CPT of the advertisement. If you’re a publisher, the cost per impression (CPI) of an advertisement is the amount of money you’ll earn for every impression of the advertisement. If you’re an advertiser, the cost per impression (CPI)
Cost per action (CPA) - Cost per action (CPA) advertising pricing structure requires that the visitor does an "action" whether it is buying something or signing up for something. The "action" does not include clicking on the advertisement.
Click through rate (CTR) - Commonly used to measure the success of an advertisement. You can get the click through rate (CTR) of an advertisement by dividing the number of times an advertisement was click on with the number of times the advertisement was shown.

Forms Of Paid Advertising:

There are many forms of paid advertising, however here I’ll just list out the more popular and common ones.

Contextual advertising - Contextual advertising is a form of targeted advertising on advertisements. The advertisements shown is selected and served by an automated system based on the content shown to a user. Example: Bidvertiser(Show text-ads on your Website or Blog with BidVertiser.)
Banner advertising - Banner advertising is basically banner advertisements placed on your site that leads to the advertisers site.
Popup advertising - Popup advertising is an advertising system in which whenever a visitor appears on your site, an advertisement will popup in another window.
Popunder advertising - Popunder advertising works on a system by which whenever a visitors leave your site or blog, an advertisement will popup in another window.
Link advertising - Link advertising is just advertising plain old sitewide text links on a site.
In-text advertising - Advertisements appear in-text, as in whenever the visitor hovers his mouse on certain “hyperlinked keyword”, an advertisement appears.
Intersitial advertising - Advertisements appear from time to time during the period of time a visitor is browsing through your site. This advertisements requires the user to press a “continue” button or the visitor has to wait for a certain number of seconds.

Types Of Paid Advertisements:

Cost Per Click (CPC) advertisements - CPC advertisements earn you money whenever a visitor clicks on an advertisement.
Cost Per Action (CPA) advertisements - CPA advertisements earn you money whenever a visitor buys a product or signs up for something.
Cost Per Mile (CPM) advertisements - CPM advertisements earn you money by the number of impressions.
Cost Per Thousand (CPT) advertisements - Same as CPM advertisements.

Different advertising networks have different set of rules and requirements for publishers, thus I strongly recommend that you read up of the terms of service (TOS) of each advertising network. The most common rules are that you should not click on your own advertisement, or encourage others to click on your own advertisement. Besides that, some advertising networks also do not allow you to use the same form of advertising as their advertisements on the same page. For example, Google Adsense does not allow other contextual advertising advertisements on the same page as it, but it does allow other forms of advertising such as banner advertising and Popup advertising.

Really do try to stick to the rules, as once you get banned from a certain advertising network, then generally do not let you sign up again. I got banned from Google Adsense a couple of years ago. That time I was still naive and have since learnt my lesson. Never again would I try to go against the TOS of a website.