A couple days ago one of our readers, Alysia, asked a pretty common question amongst beginner media buyers. The question is as follows:

How do you try to figure out if what the site is asking for is a decent rate and if you will make a profit? For example, someone just told me for 110,000+ impressions, I?ll pay $300 on a particular site for a 728?90 banner at the top. This is site wide, but excludes the home page. If you could do a part 3 posting on determining if the asking rates are fair in different situations, I?d certainly appreciate it.

This is one of the questions you really have to ask yourself before you buy a media buy placement based on your CPM, payout cost, expected CTR. I know you are asking mainly about the rate but before you even look at the rate you have to ask yourself about demographics. In Ryan’s second post of the “Media Buying 101″ series, he provides a number of tools to use whenever looking for a potential successful media buy placement. Basically, you have to start testing and finding a site that works your particular offer. Then once you have it, you then ask yourself how it works by looking at the particular demographics. This is certainly no foolproof way but your demographic is very important in order to putting together a successful formula. If you can match the original demographic to the second one, that’s one way you can increase your chances of being successful. You can use Quantcast for comparing and obtaining demographic information. If you are advertising an education offer aimed at dads, then of course you are going to want a majority male audience that have kids. The very first step if you are starting completely from scratch is to say, “What is my target audience?”.

After you’ve done your homework demographic wise, you now want to consider the actual rate. If you have a pretty good connection between the audience of the site and your offer, you can obviously afford to pay more. In your specific case, let’s calculate the CPM first: (110,000 impressions / 1000) / $300 = about $2.73 CPM. This is fairly low but it totally depends on the quality/response rate of the traffic to your ad. Without knowing the amount you are paid per action, it’s a little hard to weigh the CPM and the action payout but you should be able to do this on your own. Can you afford to pay that much per 1,000 views? You won’t truly know until you test but estimating and calculating risk can be done.

Additionally, it sounds like this is not the traditional kind of media buying advertising with an insertion order so the opportunity of out-clause looks out of the question. If you are able and you are billed by the CPM rather than a large upfront amount, then definitely exercise that ability as it’s always a good idea. Also, test a couple of banners in this instance with different styles to ensure you get a good CTR.

Overall the answer to your question can be found by…. testing. It’s impossible to take a quick look at something and determine if it will cost without using previously obtained data like demographics and experience. Calculate your risk using demographics, set up tracking and test. Collect the data that will help you replicate this campaign if it’s successful and if it’s not successful hopefully you can figure out what went wrong and learn from your mistake.