The internet: brought to you by advertising

Ah, advertising. Now we are getting to the meat of things. There are four basic advertising revenue sharing schemes out there (i.e., revenue sharing with you, the publisher of content) :

1. a percentage of cost per 1000 impressions (CPM),
2. a percentage of cost per click (usually PPC - paid per click),
3. a percentage of cost per action (CPA), and
   
4. a percentage of whatever the agency can sell your ad space for.

A percentage of CPM is the oldest model (brought over from print media), but fell out of favor because of the unsatisfied feeling an advertiser gets having spent $5000 for a million impressions, but seeing 1000 hits, 10 of which convert to a sale. The advertiser would much rather pay for the hits (the advertisement click-throughs), because of the feeling of enhanced control once the viewer arrives at the advertiser's own site. Nevertheless, CPM based networks still exist, paying approximately $0.01 per 1000 impressions. Adbrite is notorious for paying even less. Some agency FAQs list payment rates of $1.00 and more per 1000 impressions, but these are typically large banners or even full page ads, and are typically limited to some low quota of impressions per 24 hours. Although somewhat cleaning up their act of late, most CPM based agencies still use pop-ups, pop-unders, and some are still delivering malware. Careful research would be required before partnering with such an agency.

A percentage of PPC is, of course, the model of the powerhouse Google, and now all its competitors such as Yahoo and MSN. The revenue sharing algorithms have become sophisticated of late, typically paying $0.01 per click, but possibly much less if traffic is deemed of low quality, and possibly much higher (e.g., $1-10 dollars and more) for high quality traffic. This allows publishers to pursue traffic strategies ranging from sheer volume to (typically) high cost but (hopefully) high quality. I should also mention demographically targeted PPC by networks like blogads.com , which typically pay high quality traffic rates.

PPC incomes of $100/month are not uncommon, with $1000/month requiring significant effort and typically multiple web sites, and $10000/month achieved only by the blessed few. With the stakes high, Google's counterfraud strategies are extensive, and lifetime bans are common for minor infractions. Read Google's policies very carefully if you are wondering if your site qualifies for their Adsense program. New players should also note that approval for the Adsense program now requires a web site at least 6 months old and with its own domain (the rule changes are recent, so it isn't clear if simply purchasing such a web site qualifies).

PPC income has some very nice characteristics. It does take time to build, but once built, has a kind of momentum that allows attention to be directed elsewhere. However, the real money is to be made in CPA and sales commission income. The action in CPA is typically something like providing an email address to the advertiser. Many enticements are provided to elicit this desirable information, and publishers are paid $0.50-$2.00 per completed action. At high traffic sites, this can very quickly build into a 4 figure monthly income, if not 5 figures. neverblue.com is the current darling of CPA based advertising, but be sure to check forums.digitalpoint.com and warriorforum.com to see who is or isn't paying out this quarter.

The 4th model is uncommon, and perhaps the best example is text-link-ads.com . They used to pay a flat fee per month, but that has been superceeded by a 50% revenue sharing deal. It isn't as simple as it seems since they have a page ranking algorithm that determines what traffic on a particular page is worth and a publisher's revenue is tied to that. Plenty of space for a thumb on the scale. Still, a legitimate advertising co-op of this kind is probably inevitable at some point, so it's worth keeping an eye on.

Advertising and, in particular, PPC advertising is your basic site monetization mechanism. CPA pays better, but care must be taken to avoid driving away a hard won audience. Such care is well worth your while, however, since only affiliate marketing has higher revenue generating potential. It is to affilitate marketing that we next turn our attention.