Ads in a new publication

From time to time, I have answered questions on selling ads from others looking at starting a publication. Figured I'd take some of the answers I have given and provide them here, in the hopes that this would be useful for others.

I started California Kayaker Magazine, a magazine given out for free through sports shops and such in California. This is what is called "advertiser supported" - the only income is ad revenue. Readers love it, as they love free stuff (and it having good content and being quality printing makes it even better). But just because the readers love it doesn’t mean advertisers will also. So I had to determine how to price ads, and then needed to go out and sell ads. Here is some information on the process I used:

How to price ads:

First step is determine what you need to make. Add up your costs (printing, distribution, editorial costs, etc.), and divide this by the number of ad pages you plan to have (magazines are often 30-60% of total pages as advertisements, newspapers up closer to 80%). This tells you how much you need to make per page. I added a small percentage to allow for ad discounting and such, and then used this to set my minimum price for a full-page ad (at which you need to make, or you go out of business). I then looked at price sheets for other similar magazines to see what ratios they used for smaller ads (which charge more - for example, 2 half page ads would get you more than a single full page ad) and for multiple frequencies (which charge less) to determine ratios for half page, quarter page, etc., and for advertisers who buy 2 ads a year, 4 ads a year, etc.

Second step is look at what competitor publications are charging for ads (sometimes they will have their ad rates online, other times you will need to find a way to get it). The goal here is to see how your minimum price matches up against competitors prices.
Divide the cost for a full-page ad by how many thousand copies are printed. The goal is to get to a cost per thousand (CPM), which is a standard unit for magazines. Make sure you are comparing apples to apples - California Kayaker is all color, so I made sure the comparison publication prices were also for color. Also, make sure you are using number of copies printed, not the much larger number of readers (publications often report readers, which they get by multiplying the number printed by some multiplier which compensates for pass along readership, often using a multiplier of between 2 and 4).

While you are at it, get a hold of the competitive publications and count up how much ad space they have, so you can see if your percentage is in line. You can also multiple the ad space by the ad pricing to estimate how much income that publication had.

This all lets you get a feel for what ads are commanding and what you need to make, allowing you to hopefully determine what price to set.

How to sell ads:

When you have a new publication, you have no track record for potential advertisers to look at to see if you are something they’d want to advertise in. So selling ads at first is hard, and only gets slightly easier over time as you can show prior issues as examples of who you are. So, you need to tell a story of your vision to the potential advertisers, focusing of how advertising in your magazine would help them. Include who the readers will be, how you will get the magazines into the reader's hands, etc. Hopefully you have a niche so that you are reaching a target market that advertisers can't reach that well through other media sources.

You also will likely have to discount or make deals - more up front than later, but it never really goes away. When discounting, I tried to structure it so that I would get long term advertisers - say give a large discount on one ad if they place ads in next 4 at regular 4X price. But for the first issue, truthfully, I was happy just to get an ad at first for just about any price.

And see if you can figure out when the decisions are made by larger advertisers. They usually budget for each year in advance (in my case, they use calendar year and make decisions in October-November). If you miss this, chances are you will not get any ads from these companies for that whole year, as I found out the hard way (starting the magazine in January).

I also took an added step to make it a bit easier for advertisers in that I would bill for the ad after the magazine is run (many magazines require pre-payment of ads). Does add to cash flow challenges for me, as payment is not always timely.

Even with all of this, it took a year and a half before I got the magazine where the ad revenue covers all the costs of each issue.

All of this info would go into a Media Kit - a few page document that covers basic info about magazine, pricing, mechanical requirements (what size and format the ads should be), etc. You can see California Kayaker Magazine's here (PDF format).

You may want to check out a book called Starting and Running a Successful Newsletter or Magazine by Cheryl Woodard. Good read on some of the background of starting a magazine.