The average cost per thousand impressions for Internet advertising is only $2.50, which is much lower than the comparable CPMs for newspaper advertising, according to a recent Merrill Lynch report.

That number can be disconcerting for some media people, but it also is misleading.

As part of my consulting work for VPA members, I went looking for online rate cards at newspaper sites around the country. I found rates ranging from the high single digits to $25 or more. Classified products such as Top Jobs, which I wrote about in a previous column, can generate up to $25 as well.

So why does Merrill Lynch say that the average is only $2.50 when the newspaper rate cards are showing numbers far above it?

One answer lies in remnant rates. Most sites have an overabundance of inventory. That excess inventory is being filled with national remnant campaigns (ads that fill unused inventory with no guarantee on the total number of impressions). These campaigns typically come from agencies such as Advertising.com, Tribal Fusion and Casale Media.

Advertisers who take advantage of these rates are going for the largest possible audience. Because they buy huge quantities of impressions, they pay the lowest CPMs, often less than $1. Therefore, they drive down the average CPMs on newspaper sites.

The online audience growth rate at newspaper sites has slowed to less than 10 percent a year, according to the Newspaper Association of America and other sources. Yet media companies are reporting the growth of local online revenue in some cases at 40 and 50 percent or higher. It is not because their rate cards are growing that fast; it’s because they are signing more and larger contracts. Again, these contracts have CPMs ranging from $5 to $25, depending in discounts.

In comparison, one report I found, and other sources back it up, showed $5.61 CPMs for outdoor rotary bulletins, $11.95 for a 30-second radio spot, $10.85 for prime time cable and $25.65 for newspapers.

In truth, the local rate cards of newspaper sites are comparable in CPMs to their traditional counterparts. They simply need to sell more of their inventory, which they are doing and which will dramatically drive up their average CPMs.

So in conclusion here are five simple ideas for an effective online rate card:

Have competitive CPMs that make your site a better value than the competition, both traditional and pure online competition.

Offer introductory packages at reduced rates to a client who has never advertised with you online before.

Provide discounts for volume, length of contract or both.

Drive up your local revenue by selling more and larger contracts, not by driving up rate.

Offer the three standard Internet Advertising Bureau positions of 728×90, 160×600 and 300×250 and float their rates according to market demand and the amount of available inventory.