And yet, every website still contains a whopping great banner ad splashed along the top or running up the side. In part, that’s because they’ve become more sophisticated with better targeting and improved graphics. But in practice, banner ads tend to be used for one of two reasons: to attract traffic to one’s website; or as a way of visually branding your business in the mind of the public.
The key with banner advertising is always to make sure the economics make sense. We’ll look closely at the math in this chapter, but before we go on to talk about the math of banner ads and how to tell whether your banner campaign is worthwhile, let’s just take a look at the terms involved. You’re going to see these words whenever you join an affiliate program or take part in any other kind of online marketing plan. You should definitely be familiar with them.

Banner Glossary
Banner Ad — A graphic ad linked to an advertiser’s website. These usually run across the top of the page but can also run up the page (“skyscrapers”). Banners are usually limited by size.
Banner Views — The number of times a banner is seen by users. This is usually the same as "page views", but counts the number of times the banner is actually downloaded rather than the number of times the page is downloaded.

Some users click away before the banner finishes loading. Clicks/Click Throughs — Banners are operated by clicking the cursor over them. Not too surprisingly these responses are called “clicks” or “click throughs”.
Click Through Rate (CTR) — The percentage of users who see the ban ner and click on it. Conversion Rate — The percentage of people who visit your site and actually give you money. The higher the better!
Cookies — Small files placed on a user’s computer. They’re used for all sorts of reasons and by all sorts of sites. Banner ads use them to make sure the user hasn’t seen the banner recently, which banner brought them to the advertiser’s site, and even which ads they’ve seen recently. CPM — "Cost Per 1000 Impressions" The amount you pay for every thousand times a banner is shown. This is the most common way of charging for banners. Hits — The number of times a server receives a request for a web page or an image. Not a great way to measure interest. One page can have lots of images and get lots of hits, even if it’s only seen once. Often, people will say "hits" when they really mean "page views" or "impressions".

Page Impressions or Page Views — The number of times a web page has been requested by the server. Much more accurate than hits: each view is a potential customer looking at a page of your site, but not necessarily a different customer. Unique Users — The people who download a web page,
counted by IP address. You want to bring lots of users to your site so that you can create a broad customer base. The same user clicking on a banner a doAfqam E - book times could cost you money without increasing your sales. Most reputable sites will check the IP address of the person clicking on a
link and only count it once in a 24-hour period. If a site doesn’t do this, don’t advertise with them.

Banner Economics
Business online, like business offline, always boils down to math:
the difference between cost and revenue. If your banner campaign is costing more than it’s earning, you won’t be in business for very long. To figure out how your campaign is doing, you’re going to need to know your CPM, your Click Through Rate and your Conversion Rate.
These are your basic tools. If you don’t know them, find out!

Let’s say your CPM is $20, your CTR is 1%, and your Conversion Rate is 4%. (So you’re paying $20 every 1,000 times your banner is shown, it brings you 10 new visitors, and you make one sale for every 25 visitors the ad brings). The question you need to ask yourself is how much are you wasting on the 24 users who don’t buy. Cost per visitor = $20 / 10 = $2 So each visitor costs
you $2, but you need 25 visitors to make one sale, so... Cost per sale = $2 * 25 = $50 ...if your product is worth less than $50, you’re losing money.
That’s pretty simple, and as you can see, there’s not a lot of room to maneuver here. Margins are tight on banner advertising, and that applies to both the site selling the advertising space and the webmaster buying it.

Of course, hard cash isn’t the only way to measure the success of a banner ad, and one reason they’re still popular is that they’re a pretty effective branding tool. After all, advertisers spend millions on billboards without expecting motorists to drive straight through them and make a purchase! On the Internet, those advertisers can even be reasonably sure that the people who see their ads will be interested in them. But branding costs money — lots of it — with no guarantee of results. It’s usually best left to the big boys.

The banner ads on my sites usually send users to my affiliate partners, and the banner ads I place on other people’s sites usually come from my affiliate programs. They don’t cost me anything and as long I’m making the sales to pay my affiliate partners, everybody’s happy.
If you do decide to purchase banner advertisements though, and if you have a very specific market in mind, make sure they are strategically placed on sites where the traffic will most definitely be interested in your product or service. Find a site that suits exactly your specific product and you’re going to be appealing directly to your target market.