Absolute Beginner's Guide to Creating AdSense Income Websites the RIGHT way! Step By Step Success Formula.
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The Basic Math
If you intend to use paid advertising, you really have to know how to do basic math - algebra is not required!
Paid ads come in a variety of types, and you'll need to do different calculations for each type. I'll cover just a few:
1. Pay Per Click. For products, calculate your average profit per site visitor - this is NOT the same as your average profit per CUSTOMER. It means, take your profit for the month, and divide it by the number of site visitors per month. If advertising costs you more than that per click, it is going to be a sure loser. Pay Per Click visitors often have a lower return rate than visitors that come in from other ways, so if your traffic goes up, and your sales do not, it ain't gonna work! For ads, the calculation is the same - total monthly profit, divided by total monthly visitors. If ads cost more than that per click, it will be a losing proposition.
2. Paid Top Ten. Paid top ten is where you pay a flat rate per month for a set of keywords. One fee, one keyword or keyphrase, and one ad to go with them. If your profit goes up by enough to cover the fee (usually fairly low), then you are in a winning situation. If your traffic increases but your sales stay the same, then it isn't worth it. To determine ahead of time what it will take, compare the fee with your average profit per sale. If I make an average of just $5 per sale, and the PTT fee is $12 per quarter, then I know that I have to make approximately one additional sale per month to afford the advertising, and that any more than that puts me into a nice profit situation. If your profit per sale is low, and the fee is high, it is not likely to be a good risk. For ad revenue sites, you have to judge profitability by weighing increases in ad revenue against marketing costs.
3. Individual Site Ads. These are harder to track results from unless you set up a tracking system that tracks all the way through the purchase. Some traffic from them is direct, some is indirect, depending on the ad type. Best to purchase one at a time, and watch it for several months. If, after 4 months, you cannot see any results, then abandon it. Again, results should be measured by profits, not by traffic. Compare profit per sale with price per month (or year) on these types of ads, and weigh them the same way you would Paid Top Ten. For ad revenue sites, weigh the cost of the ad against the increase in revenue from the site.
4. Paid Inclusion or Permanent Ads. The equation with these is quite different, because they are considered PERMANENT. Pay once, benefit forever (if it has a yearly fee, then it falls in a different category). Paid Inclusion refers to directory services, where you pay a fee to be listed. These may or may not benefit you, depending on the directory in question, and your site niche. Permanent Ads are ads that you pay for once, for permanent placement - they are usually on new sites, so the long term benefits grow with time, if the site grows. Again, compare your average profit per sale, with the fee for either type of ad or listing. Chances are, if you only have to make a few sales to make it up, then it is going to be a winner long term. If you have to make a LOT of sales, then it might not be worth it. The potential benefit from these is different though, because it may not be enough to make up your fee within a month or two, but it may make you many times that over the life of the ad. Permanent online means that the site owner has no intention of removing it. Things online change though, so weigh these against a 2 year placement - most will give you more than that, but some will begin to drop out at about that point for a variety of reasons. So, if you buy one permanent ad, and it pays for itself within 3-6 months, then it is worth purchasing another of the same type. With an ad revenue site, you may not be able to tell directly whether these help or not - a static HTML listing will almost always be worth it in the long term, because it will help your pagerank. For others, you'll have to track traffic, and see if your traffic and income ratios stay about the same, and if both traffic and income are on an upward trend.
A little math, and a little consideration of what you need to see in return, BEFORE you purchase advertising, can help you to know ahead of time what is a reasonable risk, and it can also help you when you do your review of the ad a few months later, to know whether it is worth keeping or not. Successful marketing campaigns are based on both wise decisions ahead of time, and then on regular assessment and adjustment.
Written by Laura Wheeler
Owner, Firelight Web Studio
http://www.firelightwebstudio.com
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