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How Much Should You Pay for a Click? Andy Quick
You have a web site ready for action. Your product catalog, order tracking, credit card payment system Cheap Jerseys From China , and fulfillment process are all in place. Now all you need is traffic! Many web entrepreneurs have learned that the magic nut to crack is attraction: get a steady flow of customers who explore your site and eventually purchase goods. The overhead costs of most web businesses are minimal relative to brick and mortar stores. However, the variable marketing costs can over shadow sales revenues by orders of magnitudes. Unfortunately, unlike the saying in the movie Field of Dreams, "If you build it, they will not come!" Luckily Cheap Jerseys China , the industry has learned this lesson; some the hard way, and others in spite of the losers. Dot-coms are clearly not the darlings of the capital markets any longer; however, there is still money to be made! If you plan to start a web business or already have one but are not sure how to increase traffic and make money at the same time, you should consider a science-driven approach. What does that mean? Read on?
How to Lose $500 in 12 Hours
One weekend, my business partner and I created an affiliate commerce site. The site comprised a list of links to other online retailers. People go to our site Cheap Jerseys , pick a link to a jewelry store for example, buy something, and in turn we receive a commission from the sale. The process of creating the site, signing up the affiliate agreements, and turning it on was a cinch. The cost was virtually nothing. We Cheap MLB Baseball Jerseys , being new to this whole web business concept, thought we had an incredibly smart marketing idea: pay to have our site come up in an ad box on a major search engine (Google) every time someone searched on the word "gifts". The word gifts is searched for 49,000 times per day! We figured we would have a good flow of visitors and the money would start rolling in. For certain, we would at least break even. We sunk $500 in one day and let it rip. Here's what happened:
Our investment in Google - $ 500 Number of times our ad was displayed (impressions) - 36,964 Number of times people actually clicked on our ad when they saw it (click-throughs) - 429 Number of times a person visiting our site made a purchase - 10 Our total sales revenue- $ 77 Our total gross profit - $ (428)
The whole process took less than 12 hours. At least we learned a lesson quickly at a relatively low cost. Let's look at this event from a slightly different perspective Cheap Baseball Jerseys , putting the costs in terms of number of visitors:
Our investment in Google - $ 500 Number of times our ad was displayed (impressions) - 36,964 Number of times people actually clicked on our ad when they saw it (click-throughs) - 429 Ad cost per visitor - $ 1.17 Number of times a person visiting our site made a purchase - 10 Average sale per purchase - $ 7.70 Average revenue per visitor - $ 0.18 Average gross profit per visitor - $ (0.99)
We were basically giving $1 away for each visitor that came to the site. Not a winning business model. However, taking this information, we can assess which marketing techniques can work best for the business. Let's add 2 additional critical data points to our table:
Our investment in Google - $ 500 Number of times our ad was displayed (impressions)- 36,964 Number of times people actually clicked on our ad when they saw it (click-throughs) - 429 Percentage people who clicked on our ad (click-through rate)- % 1.16 Ad cost per visitor - $ 1.17 Number of times a person visiting our site made a purchase - 10 Percentage of visitors who purchased something (conversion rate)-% 2.3 Average sale per purchase- $ 7.70 Average revenue per visitor- $ 0.18 Average gross profit per visitor- $ (0.99)
Running the Numbers
Putting this all together Cheap Sports MLB Jerseys , you can create a formula for estimating the gross margin per visitor for a specific marketing campaign:
Average Gross Margin per Visitor = Average revenue per visitor - Advertising Cost per Visitor Advertising Cost per Visitor = Campaign Costs (Impressions x Click- through rate)
Average revenue per visitor = Conversion rate x Average sale per purchase
Putting it together:
Average Gross Margin per Visitor = (Conversion rate x Average sale per purchase) ? (Campaign Costs Impressions x Click-through rate)
Using our Google example, the average gross margin per visitor would be calculated as:
Average Gross Margin per Visitor = (0.023 x $ 7.7) - $500 (36,964 x .016) = (0.99)
Remember, this formula can only be used for a single type of campaign. Depending upon your target audience and the type of campaign, all of the above variables can change. When we launched our Google campaign Cheap MLB Jerseys Free Shipping , we used impression-based advertising, that is, we paid Google a certain amount of money for every 1,000 impressions of our ad (about $15 per 1,000 impression
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