your advertising budget and the Internet Your Internet Budget
Your web site is the keystone to your advertising campaign. This is where you tie together traditional advertising, your business and your customers. This is where you measure the effectiveness of your advertising campaign. The cost of your web site includes server space rental, internet access fees and content development costs. Your investment in the internet is part of your total advertising budget and is completely under your control.

Most businesses base their advertising budget on a percentage of sales, usually 3% to 10%. Within individual industries these percentages are fairly constant. You can find out what your competitors are spending by checking trade publications and associations and through financial institutions like Dun & Bradstreet or NCR Business Ratio. Industry averages are not gospel however, and you will want to adjust your budget to fit your needs. You may want to launch a vigorous campaign, out spending your competition to grow your business or you may want a more conservative approach.

Once you have decided on an advertising budget you will need to determine how much you spend on traditional media and how much you spend on the internet. This is completely subjective and dependent on your type of business and your advertising needs. A company selling only on the internet will spend a greater percentage of their advertising budget on their web site than a neighborhood retailer. On the other hand you will spend more on the internet in the first few months to establish your web site and generate traffic. 

To help you determine what you should spend and what you will get for your money we'll create a budget for "Joe's widget manufacturing company". Lets assume that Joe's company has $1,000,000 annual gross sales. He wants to increase sales by launching a company web site. He decides that he can afford 7% of his gross sales for three months and then has to reduce his budget to 4%, the national average for widget manufacturers.
First 3 months Annualized per Month Total
Annual Gross Sales $1,000,000 $83,333 $250,000
Advertising budget (7%) $70,000 $5,833 $17,500
Internet budget (20% of advertising budget) $14,000 $1,166 $3,500
Budget for the rest of year
Annual Gross Sales $1,000,000 $83,333 $750,000
Advertising budget (4%) $40,000 $3,333 $30,000
Internet budget (10% of advertising budget) $4,000 $333 $3,000
Annual Internet budget     $6,500
 
Joe plans to spend $6,500 on his web site in the first year with $3,500 in the first three months. Now he goes shopping for the Internet expertise he needs. What can he get for his money? A typical web site using your domain would cost:
 
Web site budget Startup per Month Annual
First Month
Internic registration (two year contract) $75   $38
Server and access fees $100 $100 $1,200
Client site setup and training ($100/hr) $800   $800
Second Month
Web site development, Forms etc. ($65/hr) $520   $520
Search engine registration ($65/hr) $520   $520
Third Month thru year
Banner advertising $360 $360 $3,600
Total   $556 $6,678
After the first year Joe plans to spend $4000 a year on his web site. $1200 will be for server and Internet access leaving $2800 for banner advertising. The Internet, however, is rapidly becoming the premiere media for advertising. Money spent on the Internet attracts more customers per dollar than any other media and as the world becomes more "wired" traditional media will become less important. Current estimates are that over 50,000 new Internet accounts are established every day. The time people spend on the Internet is reducing the time they spend reading newspapers and magazines, listening to the radio or watching TV. Telephone companies, predicting the end of the telephone by 2002, are refocusing their business on the Internet. Joe should review his budget semi-annually shifting money from traditional media to the Internet as his needs and the market dictate.

 
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