Projecting revenue from website

I am planning on starting a website(and app) similar to Wikipedia targeted towards specific issue. I want to put ads on the website to generate revenue. How do we project ad revenue? What are the major factors that affect revenue?

Advertising on the internet has many fractal properties. On the surface it is simple (CPM * impressions), but you can make it as complicated as you want. Here is a summary of the factors:

• What is your CPM rate for the ads?
  
  • Your industry affects the CPM (mesothelioma, believe it or not, has one of the highest CPM rates).
  • The more targeted your ads are to user demographics, the higher your CPM.
  • The more engagement you can measure with advertisers (e.g. resulting Facebook likes), the higher your CPM.
  • The more conversions your users have, the higher your CPM.
• Where are the ads placed on your site?
  
  • Above-the-fold placements get higher CPMs.
  • Too many ads on a page affect overall CPM rates.
• How desirable is your content?
  
  • Undesirable content actually can pull down your CPMs.

But to answer your second question on the back of a napkin, I would recommend focusing on the CPM.

If you use a public program like AdSense, then you can roughly estimate using the public CPM rates for your category. Say your industry has a $0.50 CPM for untargeted ads (a good ballpark, by the way), then you can estimate your monthly revenue as:

TOTAL MONTHLY IMPRESSIONS / 1000 * 0.50 = ~Monthly Revenue

 

You also can get paid per click, but these are falling out of favor for use on the general internet due to spam and fraud.

Notice the word untargeted. The new thing is to provide better targeted ads. Targeting means, perhaps, you know something about your visitors that makes them more desirable to specific advertisers (i.e. if your wiki is about travel, then airlines would prefer to advertise to your visitors moreso than other sites). Getting targeted ads requires a bit of work with the ad platform, but it will get you better rates. CPM for highly targeted ads can be as high as $50 CPM (yes, fifty dollars). Though the specific CPM varies a lot both based on the industry and on the demographics of your users.

Once you get big enough then you will stop using a public program like AdSense and start selling your ads directly. You can expect to get 30-100% more by direct selling, but this requires the ad selling process, managing creatives, and sometimes media buys, all of which can be more complicated.

So, I would go back to figuring out the basic CPM for your site and use this equation for back-of-the-napkin calculations:

TOTAL MONTHLY IMPRESSONS / 1000 * CPM = ~Monthly Revenue

 

And, I'll end on a final thought: What is an impression? Well, the IAB has guidelines, and that esoteric question is yet another rabbit hole that affects CPMs quite a bit. If the ads are at the top of the page, you generally get "above-the-fold" pricing (generally the CPM numbers you see quoted). If the ads are skyscrapers or on the bottom of the page, you can sometimes get "remnant" pricing (generally 1/10th the CPM numbers you see quoted). Plus, you have to factor in unique users versus repeat users and the rising use of adblocking software. If there are too many ads on a page or if users have abnormal click-through rates, their behavior can also affect CPMs.

So, yeah, it's complicated. But, try to peg your CPM and you should be good. Just don't expect it to be accurate and estimate a range. Best of luck!

P.S. ProTip: Go to AdWords and place a few ads on your competitor to get a reasonable ballpark for your site and industry.