When purchasing traffic to your website or affiliate marketing campaigns it’s very important that you first do the math to make sure you’re able to sustain a reasonable ROI. Far to often Internet marketers jump the gun with their traffic source before doing a simple equation to see if it’s even possible to become profitable. If you’re going to be paying per click you have go to ensure the back-end of your campaign is strong enough to sustain a profit. Last week I did a video walk through of one of my own Google Adwords campaigns inside our Community. Here’s a screen capture:
As I mentioned in The Weekly Grind yesterday this campaign is right around 100% ROI. For about the first month I was breaking even while I optimized my placements and ad copy for CTR. This campaign uses both search and the content network for distribution. With $0.41 cost per click here’s some simple math:
100 people click your ad @ $0.41 = $41
30% people optin = 30
25% of people that optin convert on the back-end = 7
These are average numbers but allow you the ability to look at the campaign in a different perspective. If the main offer on your back-end only pays $5 you’re going to be losing. On the other hand if your offer on the back-end pays $65+ (as the one I’m running) you’ll put up some solid numbers. Since I’m also collecting leads with this campaign I further monetize with a follow-up email sequence. By analyzing these numbers it becomes easier to see where you can make optimizations. Notice above I have my average optin rate at 30%. By doing some aggressive split testing it’s possible I could raise this up an additional 10%. If you’re running an offer from an affiliate network it’s important to ask them what the average EPC of the offer is so you can also factor this into the equation (obviously EPC needs to be much higher than the clicks).
Before you run your next campaign or while you’re in the process of optimizing your current ones keep in mind this simple math to see where all you have room for improvement. Don’t build out a big ass campaign if there is no way you’re going to be profitable with your traffic source. Good luck!
Ryan Gray is the founder and CEO of NameHero, one of the fastest growing independent web hosts in the United States. Ryan has been working online since 1998 and has over two-decades experience in Internet Entrepreneurship.
Wayne says
December 21, 2011 at 1:02 pmSomewhere in the post you lost it on the numbers. If twelve of 100 people opt-in, thats deceptively close to 12%, not 30. Or if its really 30% and 25% of those convert, your 5 dollar offer would almost break even. If you raise your optin rate from 30 to 40%, thats a 33% increase in revenue, not 10. I know that I sound like an ass but especially that last point is important, especially when making a post about the embarassing inability of marketers to perform basic math.
IMGRyan says
December 21, 2011 at 6:20 pmYou're exactly right. I messed up my numbers and am correcting now! Tried to do too many things at once! But still if I'm not this for a live campaign I'm going to have my calculator out and not miss a thing when trying to optimize. 😉