I was just contacted by a relatively large company that is requesting to advertise on my blog. Being a newbie, I'm flattered, yet clueless as to how much to quote as a monthly rate.While advertising rates may depend on lot of factors like site traffic, your niche, ad placement and even visitor demographics, we can use contextual advertising programs like Adsense / YPN or impression based programs like Adify or TribalFusion to estimate the advertising potential of our blogs.
Say you have a 125x125 space in the left sidebar where you are seeking advertisers. Run an Adsense campaign in that space for a week and track the performance using Adsense channels.
After a week, get the average CPM value for that space (this data is available in Adsense advance reports under eCPM).
Armed with the Adsense CPM figures, you can easily quote rates that are 20% lesser than Adsense.
[Adsense ads are contextual and therefore more relevant and enjoy higher click-throughs. On the other hand, static banners look the same across all pages and return visitors generally ignore them].
Here's an example using the above model:
Your site receives 30,000 pageviews (or hits) every month. The 125x125 Google ad that you ran for 7 days returned an average CPM of $5.00.
If your client is willing to advertise based on ad impressions, you may charge him $4 CPM. If he is interested in a monthly campaign, you can quote him 30*$4 =~ $120 per month.
Also, you may charge a premium (50% or more) for ads that are displayed above the page fold near the most visible areas of the site. [CrazyEgg can help you here].
And always offer choices and remain flexible with the ad formats. If your sidebar is 160 pixels wide and the advertiser's banner button is 180 pixels wide, try to work with your site designer to stretch the sidebar to fit the ad.
Related: Adverting Rates on Popular Blogs