How Much Should You Pay for a Click

Written by Andy Quick

Continued from page 1

Average Gross Margin per Visitor = (Conversion rate x Average sale per purchase) (Campaign Costs / Visitors)

Plugging inrepparttar numbers:

Average Gross Margin per Visitors = (.023 x $ 7.7) - ($500 / 1000) = (0.32)

If we used a pay-per-click advertising model, we could have saved $100. Either way, we would have lost money, but imagine if we had started with $5,000 instead of $500. The nice feature of pay-per-click is that you know ahead of time how many visitors you will receive. If you know your conversion rate and your average sale, you can modifyrepparttar 118962 formula to determinerepparttar 118963 most you should pay for a pay-per-click campaign:

Max Pay-per-click = (Conversion rate x Average Sale per purchase)

In our Google example, our maximum pay-per-click should be $0.18. For every penny we pay less than our maximum pay-per-click, we're making money! Unfortunately, as of this writing,repparttar 118964 minimum pay-per-click cost forrepparttar 118965 word "gifts" on Google is $0.37. The ultimate lesson is that for this particular site,repparttar 118966 Google marketing campaign will not generate sales revenues. But is that really true? We could increase our conversion rate and our average sale per purchase. We could increase our conversion rate by optimizingrepparttar 118967 design ofrepparttar 118968 web pages. We could increase our average sale per purchase by entering affiliate agreements that offer higher commissions. Let's say we usedrepparttar 118969 $0.37 pay-per- click model on Google for our gift site. In order to make money we would have to get our average revenue per visitor to at least $0.38. If we just focused on our conversion rate, we would need to increaserepparttar 118970 percentage of visitors who make a purchase to 4.9%. If we left conversion rate alone, we would need to increaserepparttar 118971 average sale per purchase to $16.50. Alternatively, we could try and increase them both.

Not All Ad Models Are Created Equal

Usingrepparttar 118972 same model, let's look at a different type of campaign: newsletter advertising. This form of advertising involves placing an ad embedded in a newsletter that is distributed to a subscriber base via email. The model for calculating average gross margin per visitor is exactlyrepparttar 118973 same as impression based, except your target market is different. For example, let us say we spend $1,000 to place an ad in an email newsletter about shopping tips. And let's sayrepparttar 118974 newsletter reaches 500,000 subscribers. If we usedrepparttar 118975 same click-through rates and conversion rates, our average gross margin per visitor would be:

Average Gross Margin per Visitor = (.023 x $ 7.7) $1000 / (500,000 x .0116) = $0.004

We're making money!! (not much, butrepparttar 118976 margin is positive). Translation: this campaign brings us under a half a penny per visitor. Another helpful ratio is to calculaterepparttar 118977 return on your advertising dollar:

Return of Advertising = [(Impressions x Click-through rate x Conversion rate x Average sale per purchase) Campaign Cost] / Campaign Cost

Or in our case:

Return of Advertising = [(500,000 x .0116 x .023 x $ 7.7) $1000] / $1000 = 2.7%. Translation: you're making 2.7 cents in gross revenue for every dollar of advertising you spend. Also keep in my mind that this newsletter reaches a different target audience. While people on Google may casually look for gifts,repparttar 118978 recipients of a shopping newsletter may have a higher tendency to buy (i.e. your conversion rate may be higher). If your conversion rate were higher, let's say 3%, your new average gross margin per visitor becomes $0.05!! or a 34% return on our dollar.

The Bottom Line

Using formulas to computerepparttar 118979 success of marketing plans is extremely helpful and reducesrepparttar 118980 risk of throwing away precious advertising dollars. However, understand that each marketing campaign will differ based on cost per click, conversion rates, target audience, and average sales per purchase. I encourage you to track allrepparttar 118981 data available about your marketing campaigns so you can realize profits instead of losses.

Marketing onrepparttar 118982 web can be difficult. Predictingrepparttar 118983 behavior of surfers is an art unto itself. Before you begin spending a lot of money on advertising, experiment with different types of campaigns, track all ofrepparttar 118984 results, and make future marketing decisions based on real customer behavior. Also keep in mind that there are other, free forms of advertising. Writing articles, participating in newsgroups, print advertising, and email marketing are other examples. Remember that all of these marketing techniques will have different click-through rates, conversion rates, and revenues per visitor.

Andy Quick is co-founder of (, a free web hosting directory offering businesses and consumers a hassle free way to findrepparttar 118985 right hosting plan for their needs. Feel free to contact Andy at in case you have any questions or comments regarding this article.

Andy Quick is co-founder of (, a free web hosting directory offering businesses and consumers a hassle free way to find the right hosting plan for their needs. Feel free to contact Andy at in case you have any questions or comments regarding this article.

Great Inventions: The Internet

Written by Gayle Olson

Continued from page 1

ARPANET was a success andrepparttar United States government now had a way of connecting computing centers to each other and allowing scientists, university professors, and students to communicate and work together.

By 1972, there were about 50 universities connected torepparttar 118961 network, yet computers were still not available for people to use in their homes. Computers were still only to be found in major computing centers andrepparttar 118962 people using them were all highly trained experts.

Duringrepparttar 118963 next 10 years other networks began to spring up. Some of these were known as UUC, USENET, CSNET, and BINET. People started wondering about how they could bring these individual networks together by connecting them.

This was not an easy task. Scientists had to discover how to directrepparttar 118964 flow of information from one computer to another. They also needed to find out how to get different brands of computers to communicate with each other. They had to discover how to keeprepparttar 118965 information safe and private. There were many problems to be solved in beginning to shaperepparttar 118966 future ofrepparttar 118967 Internet.

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