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Chapter 2 E-commerce fundamentals 83

Consider the capacity of a site owner to maximize revenue or ‘monetize’ their site – which
factors will be important? The model will be based on assumptions about the level of traffic
and number of pages viewed plus the interaction with different types of ad unit. Their abil-
ity to maximize revenue will be based on these factors which can be modelled in the
spreadsheet shown in Figure 2.15:
Number and size of ad units. This is a delicate balance between the number of ad units in
each site section or page – too many obtrusive ad units may present a bad experience for
site users, too few will reduce revenue. Figure 2.15 has a parameter for the number of ad
units or containers in each ad revenue category. There is a tension with advertisers who
know that the awareness and response they generate from their ads is maximized when they
are as large as practical and in prominent placements. Many online newspaper sites such as
the New York Times (www.nytimes.com) or London Times (www.timesonline.co.uk) will
tend to display ads to the top and right of the screen where they will not interfere too much
with reading the articles. A more accurate revenue model would develop revenue for
different page types such as the home page and different page categories, e.g. the money or
travel sections of a newspaper.
Capacity to sell advertising. Figure 2.15 also has a parameter for the percentage of ad inven-
tory sold in each category – for example, for the CPM ad display revenue only 40% of
inventory may be sold. This is why you may see publisher sites such as FT.com with their
own ‘house ads’ – it is a sign they have been unable to sell all their ad space. A benefit of
using the Google AdSense publisher programme is that inventory is commonly all used.
Fee levels negotiated for different advertising models. These will depend on the market
competition or demand for advertising space from advertisers. For ‘pay-per-
performance’ advertising options such as the CPC and CPA models, it also depends on the
response. In the first case, the site owner only receives revenue when the ad is clicked upon
and in the second case, the site owner only receives revenue when the ad is clicked upon
and a product is purchased on the destination merchant site.
Traffic volumes. More visitors equate to more opportunities to generate revenue through
serving more pages (which helps with CPM based advertising) or more clicks to third-
party sites (which helps generate revenue from CPC and CPA deals).
Visitor engagement. The longer visitors stay on a site (its ‘stickiness’), the more page views
that will accumulate, which again gives more opportunities for ad revenue. For a destination
site a typical number of page views per visit would be in the range 5 to 10, but for a social
network, media site or community the figure could be greater than 30.
Considering all of these approaches to revenue generation together, the site owner will seek

to use the best combination of these techniques to maximize the revenue. An illustration of
this approach is shown in Figure 2.15.
To assess how effective different pages or sites in their portfolio are at generating revenue
using these techniques, they will use two approaches. The first is eCPM, or effective cost per
thousand. This looks at the total the advertiser can charge (or cost to advertisers) for each
page or site. Through increasing the number of ad units on each page this value will
increase. This is why you will see some sites which are cluttered with ads. The other alterna-
tive to assess page or site revenue-generating effectiveness is revenue per click (RPC), which
is also known as ‘earnings per click’ (EPC). Alternatively, revenue can be calculated as ad rev-
enue per 1,000 site visitors. This is particularly important for affiliate marketers who make
money through commission when their visitors click through to third-party retail sites such
as Amazon, and then purchase there.
Activity 2.4 explores some of the revenue models that are possible.