RE: Business Plan

From: Al Lierman <alierman_at_planigent.com>
Date: Mon 04 Jun 2001 13:46:25 -0500

PATRICK GALLAGHER <patrickgallagher_at_erols.com> WROTE:

>I'm working on a business plan for a new online trade
>magazine. I'm currently tackling the sales forecasting
>for the first 12 months. Can anyone offer advice on
>what the typical sales growth would be for website
>advertising? any help would be appreciated.

I feel your pain. Here is how I have approached this for
clients in the past using a simple monthly spreadsheet:

1) Estimate the site traffic. This should tie in with
the marketing strategy where you describe your plan to
drive traffic; i.e., banner campaigns, email ads, search
engine optimization, etc. Express the traffic in terms
of pageviews by taking the total number of site visitors
and multiplying it by the number of pages you expect each
visitor to view.

2) Determine how many ads (revenue points) will appear on
each page. This number multiplied by pageviews will give
you your total ad inventory.

3) Make an assumption on sell-though %; i.e., what
percentage of your ad inventory you will sell each month.
If you assume more than 20% (the industry average), you
will need to be able to justify it. Multiply the sell-
through % by the total ad inventory. The product will be
your total ads sold.

4) Develop an assumption for CPM (cost per thousand).
This is the revenueb you will realize for every 1,000 ads
you sell. The reported industry rate card average is
$28.28 according to "The State of Online Advertising" for
Fourth Quarter 2000 published by AdRelevance
(http://www.adrelevance.com/intelligence/intel.jsp ). To be
conservative, I would halve any of these numbers for a
projection. For comparison purposes, TheMediaMart.com,
a reverse ad auction, publishes a four week pricing index,
which, for May 19, 2001, stood at $.65 CPM (yes, 65 cents)
for untargeted banner impressions and $5.09 CPM for
targeted.

5) Multiply the total ads you project you will sell by the
CPM to come up with a revenue figure.

6) Don't forget to include the costs of selling the space.
For example, if you assume that someone will buy your ads
for $10 per thousand, and that an ad network (DoubleClick,
24/7) will sell them for you, then assume your actual
revenue will be $5.00 per thousand or thereabouts. Thirty
to fifty percent to the network is standard.

I hope this helps. Feel free to contact me off list for
any additional assistance.

Best regards to all,

Al Lierman
President/CEO Planigent
Smart Business Plans and Strategies
http://www.planigent.com
(973) 962-7232



Received on Mon Jun 04 2001 - 13:46:25 CDT