Sooner or later, you will be faced with the decision of whether to use advertising on your blog or not. Advertising isn’t mandatory for keeping your blog interesting; in fact, it’s merely an optional tool you can use in case you want to take advantage of your blog’s popularity. But once you’ve decided on placing ads on your site, there’s one more issue you need to consider: setting your blog’s advertising rates. So how much can you expect to charge or be charged?

With blog advertising, there are no set rates. It is up to the blogger to design the correct ad payment scheme that attracts advertisers and allow him to generate a reasonable income at the same time.

To help you determine the right advertising rates for your blog, it’s important to consider doing some research first, particularly about similar blogs and to consider your traffic and perform some simple experimentation using your site.

Playing with figures If you think that setting your ad rates at low prices will attract more advertisers, you couldn’t be more mistaken. Your $300 a month rate may not stand against another blogger’s $600 a month rate if you only have 50,000 page views monthly and he enjoys 600,000 page views.

An advertiser will look at the ratio between the cost of advertising on your blog against the amount of traffic that your site generates, the same traffic that will potentially click on the ads.

A good ‘constant’ to consider when determining ad rates is the CPM or Cost-Per-Mille – mille being equivalent to 1,000. Let’s say a blog receives 150,000 page views monthly. For a 125×125 sidebar ad (usually the most common), the blog charges $250 monthly. Divide $250 by 150 (that’s 150,000 divided by 1,000 to come up with the CPM) and you’ll get $1.66 CPM.

The same arithmetic is used by some of the most popular blogs, including JohnChow and Copyblogger. For your blog, you might want to consider how much traffic you generate and the number of genuine page views you get. These figures will help you evaluate your blog and come up with the appropriate ad rate.

Since these blogs are well established, you could start at far lower rates if you’re still building traffic. Consider a starting figure of about $0.5 CPM, which is friendly enough to your advertisers and good enough for you. Raise this rate gradually as your blog becomes more popular and as more advertisers and sponsors buy ad space from you.

Size and location Advertising rates also vary depending on the size of the ad and where it will appear. Larger ads and those that will be placed in prime locations or ‘hotspots’ will cost more. Ads will also be more expensive if they will appear along with content or on your blog’s header. Cheaper locations will be those found on the page’s footer and the area located after the fold.

Factors that influence ad rates Not every blog can enjoy strong advertising support. That’s mainly because not every blog has the right amount of site traffic, the right visitors, market demographics or niche. These are just some of the factors that affect your eligibility for ad placement and the rate you can charge on your blog.

Blogs, by the way, do not pass through the same channels as traditional print media. The cost of providing information in blogs is low enough that bloggers can offer low advertising rates and still earn a profit.

Your Site, His Marketing: How Advertising Works On A Blog