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HIT COUNTS AND
ADVERTISING
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by: Bob McElwain
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hen you
first open your new site, hits will be slow
in
coming (unless you are an expert at generating
them). And sales
will be correspondingly scarce. Even so, you
need to be checking
your stats and sales with care. The number that
matters most to
you is ...
The Value Of A Hit
By this, I mean, what is a hit worth to you?
(By hit, I
mean one unique visitor or user session.)
Compute this number
by dividing total sales amounts (gross
profits) by the number
of hits. That is, find the total earned for
say a month. This
includes your part of sales of products
produced by others,
commissions on sales, and so forth. Your stats
will provide
the number of unique hits.
For example, if you have a gross of $200 for
the month, and
1000 hits, the value of a hit is 200/1000.
Which is 0.20 or 20
cents. If gross was only $50, then this number
is only 0.05 or
5 cents.
Moving Averages
With a mature site routinely generating hits,
this number is
not likely to vary markedly from month to
month. Even so, a good
plan is to include in your results a 3 (or 4)
month moving
average. For example, given Jan: $0.30, Feb:
$0.20, and Mar:
$0.10, add these three numbers and divide by 3.
(30 + 20 + 10)/3
= 60/3 = 20.
The reason this helps is that looking only at
the monthly
data, the above looks like an ugly downtrend.
The 3 month
average eases that downer feeling. Equally
important, it helps
you keep from getting too excited about an
apparent up trend.
Suppose the value for April jumps to $0.40.
For the new
average, January is excluded; you look at only
the last three
months. This gives (20 + 10 + 40)/3 = 70/3 =
23.33 which is
roughly 23 cents. In considering 23 cents as
opposed to 40 cents
for the month, there is a more reserved view of
the sudden jump.
I chose numbers here to make things easier to
follow. Actual
results for your site will look quite
different. And since the
computations, while simple, can be tedious and
prone to error,
most who take this sort of thing seriously use
a spread sheet
program, such as Excel.
Why These Numbers Matter
The value of a hit is fundamental to what you
can afford to
pay for advertising. And you'd like to stay a
bit under this
figure. If the ad produces only this value per
hit, the campaign
was a fizzle, for no profit was made. (The
exception would be
the value of new customers as subscribers to
your newsletter,
those who return to purchase other products,
and so forth.)
There's a lot of trial and error in testing
ads, but the ins
and outs of it are off topic here. For our
purpose, suppose you
have a well tested ad that can be expected to
generate 25 hits in
1000 impressions. If the value of a hit to you
is 50 cents, then
you can expect a gross of 25 x $0.50 or
$12.50.
What this means is you can afford to pay up to
$12.50 CPM
(Cost per 1000 impressions) provided hits add
to your subscriber
list or returns for other products. If you
expect only a one
time sale, you probably will not want to pay
more than $6.25 CPM,
so that half of revenue is immediate
profit.
With an established site, even given
troublesome variations
month to month, it is a fairly straightforward
matter to decide
what you can afford to pay for advertising.
Things are
different, though, for ...
New Or Small Sites
Initially you just don't have enough hits or
sales to produce
numbers that make any sense at all. There is
likely to be large
variations each month. Even so, it's best to
begin this kind of
tracking even when only getting started.
Probably the best approach is to forget about a
3 or 4 month
moving average, and generate an average this
month for all
earlier months. Whatever your results, you can
not afford to
advertise until you have a tested ad and feel
confident from the
value of a hit the ad will produce profits. For
a new site,
unless you already know the advertising game,
this may mean
waiting a year or more before even giving
advertising a try.
Getting Started With Advertising
Most find advertising in ezines to be the most
effective
approach on the Web. The trick is to find
ezines directed at
your target. Then test your response to an ad
in the least
expensive way. Given a poor or inadequate
response, try another
ezine. But given a good response, go for it. In
theory,
advertising that works can bring unlimited
profits.
Ezine advertizing costs are often stated with a
single price.
To make your numbers work, convert this price
to CPM. This also
makes it easier to compare costs from ezine to
ezine. For
example, if the circulation of an ezine is 4000
and the cost of
the ad is $20, you are paying $5 CPM.
Other Paths
I've haven't heard any recent reports of good
success with
banner advertising using the CPM model. Some
are reporting
success with the pay-per-click model, which
means you pay only
for clickthroughs to your site. This is
essentially the same
model used with the pay-per-click search
engines such as the one
at GoTo.Com. There are no tough decisions here.
If the value of
a hit to you is greater than what you must pay
for a click to
your site, go for it. If it's not, ignore these
avenues until
it is.
With an established site, several search
engines, such as
Google, offer some interesting possibilities I
have not tested.
Pricy, though, for new or small sites.
Directories
To submit a listing to Yahoo requires payment
of $199.
Regardless of the value of a hit to you,
submit as soon as your
site is sufficiently polished. Consider it a
one time
advertising cost, and don't look back. Yahoo
may deliver as
much as a third of search engine related
traffic.
LookSmart is not such a sure thing. Also $199,
they're
asking too much, in my opinion. But I still
recommend paying the
fee. Again, it's a one time cost. Over time, a
listing will pay
for itself, and may ultimately do so many times
over.
SNAP is another matter. They also ask for $199
for a listing
in their "Top Sites" directory. I don't think
it's worth it.
And I have not heard others recommend it. But
it is an option.
Submit for free to their "Live Directory,"
then walk away.
DMOZ is a must. Submitting a listing is free.
And if you
find a second category into which your site
fits well, a second
submission about a month later works well.
So When Should An Advertising Campaign Be
Launched?
As soon as the value of a hit and a tested ad
will produce
profits. Until this point is reached,
advertising is a waste
of money.
For a new or sluggish site, the way to go is to
keep working
at boosting your CR (Conversion Ratio). That
is, continuously
examine all elements in all paths leading to
sales, in search of
improvements that bring a higher CR. By
increasing your CR, you
increase the value of a hit. Ignore all
thoughts of advertising
until your CR is sufficient to produce a hit
value high enough
to cover the costs of placing ads.
But once this happens, go for it. All
out.
About the
Author
Bob McElwain
Want to build a winning site? Improve one you
already
have? Fix one that's busted? Get ANSWERS.
Subscribe
to "STAT News" now!
mailto:join-stat@lyris.dundee.net
Web marketing and consulting since
1993
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