Return on investment, referred to as ROI, is something you’ll hear time-and-time again in the Internet Marketing industry. When entering ANY business it’s always very important to monitor how much money you make off each and every dollar spent. Given I’ve been a high volume media buyer over the last several years I’d run on margins as slim as 20%. Much like Walmart, I made my profits with craploads of volume. As I continue to develop and progress in my career (remember A.D.P.) I’m becoming much more focused on achieving higher returns on my capital.
A question that’s frequently asked to Ruck and I is “how much money should I be willing to spend to get started?” It’s so popular it was even asked at our Grind Session event last weekend in New York City. While I would LOVE to provide an easy answer to everyone, there simply is not any “set amount” to what you need to spend to become profitable. Just as any other business venture it takes investment capital to begin making money but then it is up to the business to begin optimizing and running efficiently to turn solid profits quarter-after-quarter.
If you spend $100 on paid advertising you need to carefully analyze how much revenue you generated. If you’re losing 100% ROI (-$100 in this example) you need to re-evaluate your campaign and determine what is causing such a decrease in performance. With pay-per-click advertising platforms such as Google Adwords and Microsoft Bing you do have to bid a little higher than normal at first to garner a high quality score but if after the first two days you’re consistently dropping -100% ROI and you don’t understand what’s causing it, it’s time to pause.
My first ever lead generation arbitrage offer dropped $1,000 the first time I ran paid traffic to it (-200%ROI). What was my problem? My frontend was not near as aggressive as it should have been and I was simply relying way too much on my backend to generate revenue. That is why after many months of testing and optimizing I always recommend that you AT LEAST break even on the frontend and then utilize the backend to capitalize on the ROI.
Even if you’re not a lead gene arbitrage and are running traffic through mediums such as Facebook/other social media platforms, it’s VERY important to evaluate after each $100 or so spent to see where you are in terms of revenue. On a percentage basis, if you’re consistently down, you’re going to have a very hard time getting the campaign profitable. As a crafty Internet marketer you need to focus on your data and be able to quickly analyze the week points in your campaigns and work towards positive ROI.
Some basic questions that you can ponder to determine a weakness in a campaign:
1) What is my creative CTR?
2) How much am I paying per click?
3) What is my landing page to offer click through rate (CTR)?
4) What is much conversion rate from my landing page?
5) What are the offer EPCs in comparison to my cost per click (CPC)?
As simple as these five questions sound they’re something that are commonly overlooked in all of the excitement at generating money online. Today, tomorrow, over the next few weeks, I want you to pay extra attention to how much money you make off every dollar spent. If you spend $1, ideally you want to make $1. If you spend $1 and only make $0.50; ask yourself the above questions and work on quickly finding the weak spot in your campaign. Now let’s get to making some money! 😉
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.