How does impressions effect a site's revenue model
I've been working on a business plan for a web site that relies on advertisements as a revenue model. During, I stumbled upon a shady area - the "impressions".
The "impressions" is the number of different advertisements a site can show it's visitors.
The problem was - how does the impressions effect the revenues of the site?
My thought was that it effects only the click rate (percent of clicks per total views). Average click rate of a site that does not target advertisements to users is around 0.5%. Obviously this number must change according to the impressions, but how??
My formula was:
clickRate = 0.5 * Min((adsPerPage * pageViews), impressions) / (adsPerPage * pageViews)
adsPerPage: Amount of ads displayed on a single page. pageViews: Average amount of pages viewed by a user per day. clickRate: The chance of a single user to click on an ad in a day.
The formula means that if there are more ads to show then a user can see in a day, the clickRate stays 0.5, but if there are less ads to show - there is less chance a user will click, thus the clickRate decreases.
What do you think?