How do you price Interactive???

It wasn't many years ago advertisers, agencies and media were all saying: "I wonder how we determine the price of Internet advertising?" Now that the Internet has reached over $20 Billion in advertising revenues, we're getting it figured out. Most Internet advertising is being sold on a measurable, accountable system based on CPM, CPC, CPA, or CPL (Cost-Per-Thousand, Cost-Per-Click, Cost-Per-Action or Cost-Per-Lead) or some other "Cost Per" basis. The Radio Advertising Bureau (RAB) has several training programs available on how to sell Interactive as well as how to sell Radio. Included in training is best practices on how radio stations are successfully selling local Interactive advertising of banners, sponsorships, audio streaming and pre-rolls, and video on a different system: fixed pricing or sometimes called sponsorship pricing. Radio stations develop pricing for Interactive much the same way they do for on-air radio advertising: calculate a value for commercials, establish a rate, and present it to the advertiser. The question becomes how to value Interactive products.

RAB recommends stations base their fixed price on a competitive CPM in the market. To determine the competitive CPM, look at your local newspaper's online advertising rates and impressions. Newspapers are a good benchmark because in most markets they are taking the largest share of local online ad dollars. If they do not publish their online rates and impressions on their website, have someone call or e-mail and request the information. Our research shows most newspapers charge around $20 CPM for banner ads and as much as $50 CPM for specific placement, animation, audio or video. Once you have the going CPM for online advertising in your market you can multiply that rate times the number of thousands of ad impressions you will deliver to the advertiser. For example: if your local newspaper is selling banner ads for $20 CPM and your station website gets about 100,000 page views per month and you are selling an advertiser an ad on every 4th page (25,000 ad impressions) you would charge $500 ($20 X 25).

Whatever you do, don't give it away. Online advertising is a powerful and valuable advertising medium and you deserve to be paid for it.


John Potter
VP Interactive Revenue Development
Director Radio Training Academy
Radio Advertising Bureau
jpotter@rab.com
(toll free) 800-232-3131
(direct) 614-888-0704
(mobile) 614-507-4000