Ideas From an Affiliate, Network Owner and Advertiser

In my last post, Calculating Success – Figuring out ROI’s – Part 1 we covered a couple of things.

1. Established a click cost as our basis for figuring out profitability
2. Discussed the formula involved in calculating a EPC.

Now that we have an EPC we’re going to move on to figuring out how to get a CPC from a CPM cost. We know that CPM is the cost per 1000 people that see your ad. Typical CPM rates can range from 10 cents to 10-20$ CPM. Just depends on the site and how they value their traffic. Maybe after I do some posts on calculations and math I’ll get into media buying but not for now

In order to do this we need to get things in terms of clicks. To get things in terms of clicks we need to add another metric and that’s CTR. As discussed in the previous post CTR stands for Click Thru Rate. This is the % of people that click on an ad. Pretty simple right? I get asked a lot what a good CTR is. Of course there is about 100 factors that go into making that determination like placement on the page, how focused the site is to the ad, etc etc. If I’m just doing a Run of Network buy I typically like to get a .1-.2% at a minimum.

Here’s our formula to calculate clicks based on CTR.

Impressions * CTR / 100 = Clicks

lets put some numbers in here.

1000 * .2 / 100 =  2 clicks

If we get 1000 impressions and we have .2% click through rate that means we’re going to get 2 clicks per 1000 impressions. Does this make sense? Let’s use easier numbers. If we have 1000 impressions and 10% ctr that would be 100 clicks right? and 1% would be 10 clicks? So there for our number looks right at 2 clicks per 1000 impressions.

We’ll now be able to calculate our CPC since we have things in terms of clicks. Here’s the formula.

CPM / clicks = CPC

let’s assume we’re paying a 1$ CPM the math would look like this based on our previous 2 clicks.

1.00 / 2 = .50 cents

Make sense? Assuming we are direct linking to the offer from our media  buy all we need is an EPC better then .50 cents and we’re profitable.

We can then take it a reverse it. What if we knew our EPC to be profitable was 75 cents. And we knew our CPM can we find out what CTR we need to be profitable? Of course, we just work with backwards.

1.00 / c = .75

we then multiply both sides by c to get

1.00 = .75c

then we divide both sides by .75 and wind up with c or number of clicks being…

1.00 / .75 = 1.3 clicks  to be profitable

plug this back into to our first equation

1000 * ctr / 100 = 1.3

1000 * ctr = 130

130 / 1000 = .13

We only need a .13% ctr in order to make this campaign profitable if our EPC was hire.

Can you now see how that can really help? You can do some simple math based on what you know and find out really quick what kind of ctr you’d need on your ads, conversion rates or what you should pay for media. If you know that you can’t get better then a ctr of .1 and the typical epc of an offer is $1.00 then you know what you can pay for media and still be profitable.

Here’s two calculators for these equations

Number of clicks from based on CTR

CPC based on CPM and Number of clicks ( calcs busted cause I hate WP, it’s jacking my code. If anyone wants to send me a fix I’ll put it up)

I’m not a local leadgen guy first off. I know I did that post earlier today about local leadgen and that was more my thoughts on a nice scalable business model. I love building business models more then anything now. Just figuring out how to build and systematize stuff to make it profitable and sustainable. However I was thinking about good leadgen niches, if I was going to run a local leadgen campaign.

So in the online world we have a few different ways to monetize stuff on the backend. Of course you can make this as granular as you want however I like to throw things into 3 categories.

1. Small ticket 1 time items
2. Big ticket 1 time items
3. Continuity

Small ticket items might be anything that the owner only makes under 100-200$ profit. I don’t know if I’d mess with these verticals much. The only way I’d be interested in this world is if I could do some sort of coupon and coupon download charge. But honestly I don’t think there’s a ton of money here without some pretty complicated systems.

Big ticket items are things where there are thousands of dollars potential profit. In the internet/ call center marketing world this might be things like bizopp coaching and seminars. A lot of these have been built such as debt consolidation, mortgage, real estate. But there’s still tons more that are smaller more niche and not as competitive. A few that come to mind are:

• Mold remediation, typically 5-10k cost minimum with 50% of that profit and paid by insurance
• Remodel, roofing, paving, pools….
• Crane service
• Home theater install
• Web designers
• I’m sure you can come up with some ideas here as well

Then my favorite is continuity in the offline world. I call it continuity because these are repeat customers where lifetime value of a customer really comes into play. This is what Groupon is really hitting on. From what I read it works out to a breakeven or loss leader for most of the businesses. However the lifetime value of the customer is worth much more if they merchant does things right.

Offline continuity I consider businesses where clients come monthly or something close to regular.  These are you usuaully service based professions of some sort. Here’s a few you can think about:

• Tanning
• Nails
• Chiropractor
• Oil change
• Veterinarian
• Hair Dresser
• House Keeper

You get the point. Of course the holy grail of niches would be the one that was continuity and a big ticket item, Dr’s maybe? Don’t think that’s legal but you get the point. Have fun with this and keep earning.

Success,
Smaxor

P.S. Come learn to market with Ads4Dough.com my CPA network.

I know I said I was going to do the second math equation post next. However I felt that was a little heavy so I’m going to do something less technical in between to lighten the mood.

On twitter the other day ( I’m @smaxor ) I was talking with a few people about Local lead generation marketing. As you may have picked up that’s all the buzz in the internet marketing community.  Frank Kern if you’re familiar with him has said he’s getting out of Internet Marketing and getting into Local marketing. I don’t really know why this has happened but Local marketing has a lot of potential. But the way it’s being sold and people are being told to go about it, I don’t know that I agree with for the real marketer. Maybe for noobs it’s a good idea. However for the real marketer I don’t think in the carnation that’s being sold is all that scalable and very hard. We had this whole conversation on twitter the other day and Justin owner of affbuzz as me to package it up and put it as a post to help people, so here goes.

You’re probably thinking, so what’s the flaws and what do you suggest. First off I don’t do anything in local but have thought about the model pretty extensively.

For those of you that don’t know local marketing it means going to your local businesses and getting them to do lead generation to get new customers and clients for their businesses. I.E. go to the local chiropractor, plumber, contractor, hair salon, etc. Build lead generation campaigns for them and sell them the leads for more then they cost you to generate. Can you see the flaws in this?

1. Clients suck and with this model you’re in the weak spot.
2. The hardest part of marketing is learning all the different angels of a vertical, this has you doing many verticals which is a PITA
3. How many leads can your local hair salon buy?

Those are my top 3 on why I wouldn’t touch local marketing in how most guru types are pitching it.

However that doesn’t mean it doesn’t have potential, guess what? We’re going to end up back with niche marketing just on a more locally focused level. Call it what you will but real good “local” marketing is niche marketing. You’re probably thinking to yourself, what in the world is he talking about.  Well here’s how you build a great huge business starting with local.

1. Pick a niche, 1 niche, 1 type of business and know it better then the business owner. Spend a ton of time learning everything there is to know about marketing that niche. What, why and how people buy. What the pain motivators are. Why they’d chose one company over another. What the lifetime value of a customer is to someone in that vertical. Are they a one time deal or do they come back if they come back how many times on avg and for what amount of profit/revenue.
2. Once you have a solid understanding of the business build a site that’s your brand to capture the leads on. Don’t call it San Diego XXXXX. Call it XXXX deals, XXXXX resources, XXXXX reviews, or whatever else is general enough that you can grow it past 1 city.
3. Start testing the campaign on your own dime. Drive leads with no buyers just to test if the model will work for you and what it’s going to cost you to generate leads. Once you’ve optimized and done all your testing. This is when we start to approach a business.
4. Now you’re ready to start talking to actual business owners. From all your research you now know A. how much a lead is worth to a business in that space and can probably tell them how and why better then they can. B. You know what it would cost you to generate a lead for that business so you’re aware of the margin available that it’s a viable business model.
5. Lock down your first Buyer for the leads and start sending some test leads. There’s always going to be issues. Learn how to deal with those so you don’t get a ton of returns. Make sure you always have the business you’re generating leads for in mind before yourself. If you think about them and provide great leads you’ll have a buildable business.
6. Once you’ve tested and made a couple bucks sending leads to this buyer you’re probably going to cap them out. They’ll say I can’t take anymore leads, we’re too busy. So guess what now you go to all the other businesses in town and find 5-10 buyers of the leads. Get a good group of buyers in your posse and then let them bid against one another for the leads. This will keep your costs the same but drive up the value of the leads. Something else you can consider doing is making them non-exclusive. You can sell a hair salon lead to 3 salon’s and they can each call and try and sell the lead. Of course you don’t get paid as much per lead but the goal is to make as much as possible. So if you can get more exclusive or semi-exclusive do it.
7. Once you’ve tapped out your city for that niche start moving onto the next. You’re a master of your niche. I should be easy to duplicate.
8. When you grow to a size you can’t handle the first person you can hire is a sales rep to manage accounts. Put them on the phone and start growing more and more cities.

At the end of the day if you have 20-40 cities for example and it’s all the same brand/site, which is yours at this point you have a very salable business. An example of someone that’s built a brand promoting local businesses is 1-800-dentist. This isn’t a leadgen model but they’ve basically got money from dentists to market their brand. They made money marketing just the same as you would. And then at the end of the day they own the whole brand. Then you’d technically be called a lead aggregator

But again this is Niche Marketing grown from local up. This is not local marketing But I think it’s a 1000% better way to go.

On a side note if you’re looking for a cheap simple way to manage lead flow check out leadmesh.com it costs 300$ a month and has a very nice UI and capabilities to take leads in multiple ways and distribute them out in real time or delayed. Also, supports exclusive and semi-exclusive models.

Hope this helps.