A few weeks ago I started a live case study of launching a website aimed at earning advertising revenue, the VoFiles Project. It’s time to talk about how to determine a website’s initial advertising strategy in four easy steps, as well as our first update on the progress of VoFiles.com.

I’ll talk in general terms about determining advertising strategy, and also describe how we went about it for VoFiles.com.

1. Evaluate advertising opportunties
Anytime you launch a new website, you should already have an idea of what plans you have for earning revenue. For the purpose of this discussion we’ll assume advertising is one of the main revenue strategies for your site. Now, where do we go from here? It’s not as simple as just deciding to go after advertising, there are many choices as to how you go about it, and you can often work with multiple strategies.

Premium Advertising
Also known as brand advertising, directly-sold advertising, sponsorships, or endemic advertising, this is advertising you sell yourself, most likely to companies within your topic or industry. There are a few companies that can help represent your inventory for you, but most of them actually classify more as small ad marketplaces. This is generally the most lucrative form of advertising, but it usually requires a high traffic site or a site that is a leader in it’s topic. It also requires the most amount of effort to sell, manage, bill, and invoice. The bottom line is that very few new sites can sell premium advertising right off the bat unless they start out with a lot of momentum and a connected management team. I’d generally suggest planning for this later down the line when a site is more established.

Contextual Advertising
Most people will simply know this as Google Adsense, but there are other players of course like the Yahoo Publisher Network. This type of advertising can be a huge success for a lot of focused sites in certain industries. The pages of your site need enough content to allow the contextual engines to find appropriate ads, and you need users that will take some action and click on ads. This is a common choice for a lot of new sites, and it’s generally easy to setup. One thing to be aware of is that it can give your site a less than professional feel if you’re really looking to sell high quality targeted ads in the future. There are some other contextual solutions that offer some different things like Amazon Omakase, Chitika, and Quigo Adsonar.

General CPM Display Advertising
One of the most popular forms of advertising is general display ads like banners, leaderboards, skyscrapers, and rectangles that are supplied by a bevy of ad networks. This is very easy to set up, and because most of the networks pay on a CPM basis you earn revenue whether uses click on ads. Sites that don’t have much content or may be more general in nature will usually find better results with this than contextual networks. Many networks do have strict requirements on what type of sites they’ll accept and also have minimum traffic requirements. It’s also a very natural lead in to selling targeted display advertising in the future as your users won’t notice much difference except an improvement in targeting and relevance most likely. The networks in this space have different specialties, strengths, and weaknesses. Some of the major players are Remix Media, Burst Media, Valueclick, Tribal Fusion, Advertising.com, CPX Interactive, Tacoda, and more. Of course, I could talk for hours on how this type of advertising should be auctioned through an exchange like the Right Media Exchange using a product like RMX Direct, but we’ll save that for later.

CPA/Affiliate
Cost Per Action (CPA) and affiliate advertising is a high risk/high reward form of advertising that works amazingly well for certain publishers, and horribly for others. The premise is that you get paid when you drive a user to an advertiser who pays you when that user performs the action the advertiser wants them to perform. This works really well for sites that recommend users buy things, or other classic affiliate sites like ring tones, software, ebooks, etc. There are actually affiliate networks like AzoogleAds and Commission Junction, but often you can work directly with an advertiser like Amazon.

Text Links/Ads, RSS, and Marketplaces
There are companies that sell text links on your site like Text Link Ads and Adbrite. Also companies that can sell ads in RSS feeds like Feedburner and Pheedo, or other marketplaces like Adify, Adster, and Performancing.

For VoFiles, we knew that selling premium advertising was probably unlikely because of general content as well as the social network audience not being the most desirable to advertisers. The trade off is that because VoFiles is in the booming social networking space, we’re hoping to use sheer traffic volume on ads that pay less to generate revenue. Which is easier? A targeted site is probably easier, but we wanted to explore the social networking “studio space”. Now that we know that our goal is to aim for traffic volume we can plan accordingly. Because our pages are not filled with focused content, contextual advertising is also a bit of a challenge, but still possible. The obvious choice was to start off with display advertising networks, with an eye toward the future in contextual ads as well as text ads and joining a few marketplaces.

After evaluating all those options, it’s time to choose your tool.

2. Choosing a Tool to Manage Ads
Depending on what type of advertising options above you choose, you’ll need a good tool of some type to manage your ads. Most of the above solutions provide an “ad tag” which is basically some type of javascript or similar code that puts the ads on your site. However, if you plan on running multiple types of advertising, you’ll need a tool to manage it all.

Ad Servers
The most common tool used to manage web advertising is ad servers. They generally can manage graphical display advertising whether it’s premium or ad networks, contextual advertising, and affiliate advertising. Very few do much with text links at this point. There is quite a range of ad serving options. You have everything from an ad server meant for premium like DART from Doubleclick, to a smart ad server like Right Media’s PMX product made for yield management and maximization or remnant inventory, to something free like phpAdsNew. Most ad servers do have fees associated with them since they provide bandwidth, support, hosting of data, and other services.

Revenue Management Platforms
If you are just getting started with advertising on your site, or you are primarily working with contextual or display ad networks, then a revenue management platform like RMX Direct is the best choice for you. RMX Direct is neither an ad server alone or an ad network, but combines the best of both worlds while allowing you to manage and auction your inventory to any ad networks you’re working with, as well as work directly with ad networks on the Right Media Exchange through the tool. It’s a free tool which makes it easy to get up and going and monetizing your ad inventory right away, while also not locking you into working with one ad provider.

Other Random Tools
There are quite a few other random blog plugins, PHP scripts, and purchaseable tools that can be used to help manage your ad inventory in various ways. There are too many list, and not that many I’d really recommend.

When we looked at tools for VoFiles.com, we knew that premium advertising was most likely not going to be a huge part of our advertising mix, so RMX Direct made the most sense for us as a way to manage our ad network relationships. It not only allows us to get all the networks and advertisers on the Right Media Exchange auctioning for our inventory, but allows us to auction ad networks like Adsense, Yahoo Publisher Network, Valueclick, and more.

If we end up using some of the various ad marketplaces, we will most likely just have to place their code directly on our pages as they don’t fit their ads in standard ad sizes.

3. Placing Ads on your Site
After you have your types of advertising picked out as well as the tools in place to manage it all, it’s time to choose where to place your ads on your site. This is something I refer to as the “advertising balancing act”. As a publisher, you want to make as much money as possible. In order to reach that goal you need to place ads where users are most likely to see/click/act on them. However, this usually leads to a worse user experience on your site as ads can make your design and usability worse, they can distract users from their core tasks, or generally just get in the way. An argument can be made that really highly targeted and useful ads can help a user’s experience, but generally this isn’t the case. So how do you balance the need to make money with the need to please your users and keep them coming back?

Unfortunately, there is no easy answer to this equation, it’s really up to you as a publisher to analyze how much advertising your users will put up with and where it should be placed on your site. I’ve seen sites that are successful with very little advertising that blends in perfectly with their site, and also seen sites that have blatant and annoying advertising all over the place that users seem to deal with just fine.

I can recommend look at the heat map provided by Google Adsense to get a general idea for which areas of a web page usually see the best ad results. The darker the color on the map, the more successful ads are in that area. As you can see from the map, the best place to put an ad is smack dab in the middle of a page where a user is used to seeing real content. So that ad space is the most valuable, but also the most annoying spot for users to see an ad.

For VoFiles.com we decided to place our ads in standard locations without getting too much in the way of the user. Our 468×60 banner ad is placed in a central location near the top of the page. 728×90 leaderboard ads usually pay more, but didn’t fit into our design. We put a wide 160×600 skyscraper about middle way down the page on the right side in the column, and then on the actual profile content pages we add a 300×250 rectangle box in the middle right under the meat of the content. We will most likely add more ad placements on the page over time, as well as some text ad advertising in the right column.

4. Monitoring Your Results and Testing

The last piece of the puzzle which often separates publishers from decent success to great success is continuing to monitor your ad results and continually test.

Monitoring Results
Just like with web analytics, analyzing advertising results is very important to recognize changes and make the most of your ad inventory. Using a good ad server or revenue management platform like RMX Direct will help you have access to good reporting data that will allow you test different ad placements, geotargeting, frequency-capping, and other techniques to squeeze the most revenue possible out of your inventory.

Testing
Most people just think moving around where your ads are located is all there is to testing. While that is a great thing to test, don’t forget to test other ad sizes, and most importantly test as many ad networks, ad marketplaces, and different advertising avenues as possible. Also, tests should be rerun in different times of the year, because what worked in January might have different results in July.

VoFiles Progress Update
Instead of weekly statistical updates as I had suggested, I’m going to do monthly updates on VoFiles statistical progress. It’s unlikely I would really get weekly updates accomplished, and in most weeks there probably wouldn’t be much change worth noting. December will be the first full month of stats for VoFiles, so we’ll do a first month stat update at the beginning of January.

Regarding the progress of the site, we haven’t really done much marketing at all yet. We’ve added some profiles, and done some informal user studies which has taught us that many social network users don’t really get what to do on VoFiles since they aren’t used to the voting concept made popular by Digg. The quickest solution is to add more obvious instructions, but I think for long term success we need to change to something along the lines of a monthly voting model. Basically, the votes will last for a month so that a user could be voted “Best Profile Layout” for the month of January. This should be easier to understand, provide something for users who have profiles submitted to shoot for, and hopefully lead to more viral spreading of the site among social networks. We also need to develop some badges for profiles to promote voting or show that a user has won a VoFiles monthly category.

It has proved to fill our needs in some ways so far to test various parts of RMX Direct, but we definitely need more traffic and users to be accepted by other ad networks and get a full geographical spectrum of users.

Google Page Rank: 0/10
Alexa Rank: 167,833 (Skewed way too high, our traffic doesn’t back this up)
Alexa Graph: