Low-Yield Ads Can Add Up to Healthy Profits

Accurately measure the "success" of your online and ezine advertising with these tips.

We recently read some advice from an Internet marketer who said that unless his ad got "hits" on his site equal to 3% of the list where he advertised -- and then at least made 2% sales from those hits -- he considered the ad a failure and recommended not advertising again in that ezine.

First, an aside. We believe "HITS" stands for "How Idiots Track Success." Don't EVER use hits as a measure for anything. Hits are a totally useless measure.

What you should care about and measure instead of HITS are the number of unique visitors.

OK, now let's look at the advice. At first, it sounds sensible.

We have no quibbles with rules of thumb -- they are useful. And this one does give a sense of how responsive an ezine list is. If you have a tested ad, getting 2% sales is certainly reasonable -- we often get MUCH more.

So, why is this NOT good advice?

Because it completely ignores what you should ultimately be measuring: revenue, number of new customers, and profit.

Let me give you an example. We recently placed an ad that had worked very well in other ezines. The ad in the new ezine we were testing only cost $16 for top placement, and the ezine went to 33,000 people.

According to the proposed formula, we'd need at least 990 visitors and 20 sales to run this ad again.

However, we only got six sales.

Was this ezine a failure for us?

Not at all. In fact, the six sales netted us a profit of $50.40. That means we made back our ad cost plus more than twice again as much.

Getting 315% of ad cost upfront is a great result for an ezine ad!

And that doesn't include all the people who signed up for our free ezines who may buy in the future as a result of this ad -- or the additional sales from these six new customers.

Here's another example: We recently ran a solo ad that cost $89. It went to 115,000 subscribers.

Our results: We got 215 visitors, and 5 sales totaling $100 in gross profit. That means that we got less than 0.2% of the list visiting our site, and of these, 2.3% purchased.

Was this ad a dismal failure? (After all, we didn't get anywhere near the 3,450 visitors or 69 sales.)

Not at all!

Why? Because besides more than breaking even, we got 154 new subscribers to our ezines, and we know that some of these subscribers and customers will purchase products in the future.

In fact, in the two weeks since that ad ran, we already have made an additional $30 from two more new subscribers. And, we know that we will sell many hundreds of dollars of additional products to these 154 subscribers over the next couple of years.

Note: There is probably a good reason the first ezine only charges $0.48 CPM for top sponsorship, and the second only charges $0.77 CPM for a solo ad. These ezines do not seem to be as responsive as other ezines.

But who cares?

The only measure that really matters is the bottom line results of the ad. All other metrics are only useful for tweaking and improving results.

So how do you decide if an ad "worked?"

Simple. If an ad breaks even or makes a little money upfront, run it again. If not, then you need to see if the additional benefits you did get are worth it.

(One caveat: You may also want to evaluate the quality of customers you're getting, and if you have many ads that work, you will want to focus on those that are most profitable. However, these are more advanced considerations.)

How do you know? First, always have some way to track the results of the ad. We use a special URL that is different for each ad.

Second, calculate how much revenue you generated from the ad.

Third, subtract out your product and other costs.

If the resulting gross profit is more than you spent on the ad, you have a winner.

If not, then you have to look at other ways you may generate revenue from that ad. For example, consider if you got some secondary benefit, such as additional subscribers to your ezine. How much revenue will these new subscribers generate for you -- and in what period of time?

For example, one of our friends knows that each subscriber is worth $5.00 to her in the first year. When you know this, you can decide how long you want to wait before you say an ad did or didn't work.

Some smart companies are willing to take a slight loss on originally acquiring customers, because they know that they'll make it up very shortly -- and then earn a LOT of profit from those customers over the coming months and years.

So, as you see, the real test of whether an ad works or not has nothing to do with "hits," visitors, or conversion rates. It has everything to do with profit.

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