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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