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Chapter 2 E-commerce fundamentals 81

which enables them to offer text- or image-based ads typically on a CPC basis, but option-
ally on a CPM basis. Microsoft and Yahoo! have similar, but much smaller networks.
Typical costs per click can be surprisingly high, i.e. they are in the range €0.10 to €4, but
sometimes up to €20 for some categories such as ‘life insurance’ which have a high value
to the advertiser. The revenue for search engines and publishers from these sources can
also be significant: Google’s annual reports (http://investor.google.com) show that this is
between a quarter and a third of Google’s revenue.
3 Sponsorship of site sections or content types (typically fixed fee for a period). A
company can pay to advertise a site channel or section. For example, the bank HSBC spon-
sors the Money section on the Orange broadband provider portal www.orange.co.uk. This
type of deal is often struck for a fixed amount per year. It may also be part of a reciprocal
arrangement, sometimes known as a ‘contra-deal’ where neither party pays.
A fixed-fee sponsorship approach was famously used in 2005 by Alex Tew, a 21-year-old
considering going to university in the UK who earned $1,000,000 in 4 months when he set
up his Million Dollar Homepage (www.milliondollarhomepage.com). His page (Figure
2.14) was divided into 100-pixel blocks (each measuring 10 by 10 pixels) of which there
are 10,000, giving 1,000,000 pixels in total. Alex spent £50 on buying the domain name
www.milliondollarhomepage.com and a basic web-hosting package. He designed the site
himself but it began as a blank page.
4 Affiliate revenue (CPA, but could be CPC). Affiliate revenue is commission-based, for
example I display Amazon books on my site DaveChaffey.com (www.davechaffey.com)
and receive around 5% of the cover price as a fee from Amazon. Such an arrangement is
CPA (cost per sometimes known as cost per acquisition (CPA). Increasingly, this approach is replacing
acquisition) CPM or CPC approaches where the advertiser has more negotiating power. For example,
The cost to the advertiser
(or the revenue received in 2005 the manufacturing company Unilever negotiated CPA deals with online publishers
by the publisher) for each where it paid for every e-mail address captured by a campaign rather than a traditional
outcome such as a lead CPM deal. However, it depends on the power of the publisher, who will often receive more
or sale generated after a
click to a third-party site. revenue overall for CPM deals. After all, the publisher cannot influence the quality of the
ad creative or the incentivization to click which will affect the clickthrough rate on the ad
and so earnings from the ad.

Figure 2.14 Alex Tew’s Million Dollar Home Page (www.milliondollarhomepage.com)