“How to scale to a million dollars a month”

Breaking Down the Metrics

Make sure that you understand the fundamentals of how to make a profit with PPC. It’s all about using your data and crunching numbers to ensure your campaign will be profitable. Here are some of my tips on PPC formulas and how to calculate your maximum CPA spend (part 2).

The Importance of Landing Page Optimization

Because CPC, CTR, CR, and CPA all affect each other, make sure to make tweaks to areas that will create the largest return. If your conversion rate is 5% with an average CPC of $.25, and you receive 500 clicks, then that means:

$.25 x 500 = $125 (cost)
500 x .05 = 25 (actions)
CPA = CPC/CR or cost/actions = $5

If you increase your conversion rate (CR) to 6%, then you receive 30 actions at $4.17 CPA; raise your conversion rate to 8% and your CPA drops to $3.13. Beyond just landing page optimization, if you’re able to drop your CPC from the original scenario down to .20, without changing anything else, then your new CPA becomes $4. Optimizing all of your metrics will have dramatic effects if done consistently.

Learn From Using Other People’s Money

This isn’t as bad as it sounds, but it’s a good way to learn. Work for someone else managing their campaigns, and you’ll learn a lot, without having to spend the money out of your pocket. My only warning is of course, make sure you know what you’re doing first before you play with someone else’s money!

Each Step is 10x More Important Than the Previous

This was an interesting train of thought. Your targeting is important, but your keywords are 10x more important. Your keywords are important, but your ad copy is 10x more important. Your ad copy is important, but your landing page is 10x more important. See?

I assume his statement refers to the conversion funnel, where at each step of the way you encounter “drop-offs” (people who drop out of the path to a completed conversion). It can take a lot more effort to get the clicks to convert, than it does to get the click, or figure out the target demographic.

Outsource Anything Non-Essential, Finish What You Start, and Run Your Business Like a Business

BlitzLocal sends its laundry out so programmers aren’t wasting valuable time doing laundry. Basically, if you have tasks that can be done by someone else that would be more detrimental for you to spend your time doing, then outsource it.

Furthermore, with any business venture, whether it’s brick and mortar or online, it should be run like a business. Ideally, if you have money to rent an office, it might help you be more productive to do so. When you’re running like a smooth, organized business, it can be easier to scale to that million dollars a month!

And here are their keyword terms:

Banana Republic reserves exclusive rights as to the advertising of our trademarked company name within all pay-for-placement and all other search engines. These names include: Gap, gap.com, Old Navy, oldnavy.com, Banana Republic, bananarepublic.com, Piperlime, piperlime.com and any variation/misspelling of our trademarked names. Additionally, you may not claim to be Gap, Old Navy, Banana Republic, or Piperlime in any pay-for-placement or other search engines.

* No bidding on the brand terms (eg: “Banana Republic,” “bananarepublic.com,” etc.), misspellings and / or derivatives of the brand terms. These names include: Gap, Old Navy, Banana Republic, Piperlime, gap.com, oldnavy.com, bananarepublic.com, piperlime.com, etc. and any variation/misspelling of our trademarked names.

* Brand terms, misspellings and / or derivative of brand terms must be set to negative match in keyword bids for all Search campaigns (exact and broad match on the brand terms are not allowed on trademarked terms such as “Banana Republic”, nor on misspellings and /or derivatives of the brand terms)

* Use of the brand terms, misspellings and / or derivatives is not allowed in ad title and ad copy of any Search campaigns

* Direct linking to the gap.com, oldnavy.com, bananarepublic.com, or piperlime.com domain is not allowed

* Cyber squatting through the misspelling or use of the brand terms, misspellings and / or derivatives within URL strings and domain names is not allowed

* Violations will be cause for affiliate’s immediate termination and any unpaid commissions will be unearned, disallowed and/or charged back.

So why does this annoy me so much? Well, what if I wasn’t their affiliate, and I had no BR/Gap/Piperlime deals on my site? Then they couldn’t enforce this rule; and my ads would be no different. However, since I coincidentally have their deals on my site and am signed up for their program, I am now required to negative match all of my existing campaigns for them? Also, their terms aren’t very clearly stated. Yes it says “Brand terms, misspellings and / or derivative of brand terms must be set to negative match in keyword bids for all Search campaigns,” but there is a qualifier immediately after that states “(exact and broad match on the brand terms are not allowed on trademarked terms such as “Banana Republic”, nor on misspellings and /or derivatives of the brand terms).” So what the hell are they saying?

I’m no lawyer, and I don’t want to get into some stupid trademark fight with Banana Republic so I’ll go ahead and do what they want, but what do you guys think? Honestly, this is jacked up in my opinion. BR just leaves a bad taste in my mouth now. I could understand if I was bidding on their trademarks or using them in my ads, but I’m not. I’ve never violated any trademark terms with any merchant and I take trademark policy very seriously, which is why I take such offense. Even Google recognizes the delicacy of these types of situations and has stated in their trademark policy that:

Advertisers may be restricted from using certain trademarks as ad text per the request of the trademark owner. In cases where the trademark owner claims rights to a term in countries outside the US, Canada,UK or Ireland, advertisers might not be allowed to use certain trademarks as keywords or as ad text per the request of the trademark owner.

In some instances, Google may not remove the ad or ads as requested. For example, with Google’s broad match keyword option, an ad can show on variations of a keyword term. As a result, an ad may show for a term that is a variation of an advertiser’s keyword. Even if the search query that shows the ad contains a trademarked term, Google will not remove an ad if the advertiser isn’t using a trademarked term as a keyword.

When Google receives a complaint from a trademark owner claiming rights in the US, Canada, UK and/or Ireland, Google will only investigate whether the advertisements at issue are using the trademarked term in the ad text. Google will not disable keywords in response to a trademark complaint.

I’d be interested to hear what you guys think. Do you think it’s OK for affiliate merchants (or merchants in general if we’re looking at the bigger picture) to be allowed to enforce negative keyword matching for ads that happen to appear when a user does a search that includes their brand names? Am I now to also negative match every “misspelling” I can think of in order to save my own ass? Are there a lot of merchants doing this? (This is the first time I’ve been requested to do so.) And does this set a precedence for other affiliate merchants and merchant sites to be able to tell any advertisers they want to actively omit any keywords relating to their trademarks? At what point can advertisers not be sued or attacked during non-active participation? Your feedback is welcome and greatly appreciated.

So what’s different about Tracking202 Pro versus Tracking202? Well, for instance, there is the unique “spy view” feature where referral visit data are displayed in real-time, bidded and actual keyword search query terms are revealed side by side, and it has a pixel tracker that can account for sub-IDs. Plus a host of other really kickass features that create a more dynamic tracking program.

I’m planning on launching some new campaigns in the next few weeks so I can’t wait to test their system. I asked Steven Truong to give me a sixty-second breakdown of what Tracking202 Pro can do for PPC advertisers.

Visit their site for more info, or contact Steven at the email address in the video to request inclusion in their beta testing.

CPC Banners work just like CPC text ads on AdBrite. We’ll enter your max bid (typically 50 cents to $1.50 per click) and then our system automatically optimizes on a site-by-site basis to deliver clicks at or below your target cost-per-click. You’ll only pay when your banner ad gets clicked.

It seems pretty promising, as long as their quality publishers fall within your demographic, the ad placement is decent, and your ad is approved. A few of their publishers include White Pages, Fox News, Photobucket, and Woman’s Day.

Each publisher offers different options: flat-rate ads, CPM text ads, CPM banners, and now CPC banners. If you’re going to test the CPC banners, use the estimates of your average click-through-rate to determine your daily clicks according to the publisher’s estimated daily page views.

For instance, if your average banner CTR is .5%, then your estimated maximum daily clicks might be .005 x 260,000 = 1,300 clicks. Remember that you can cap your daily spend, as well as test different maximum CPC’s. Actual impressions will depend on your max CPC and competitor presence, as well as daily site activity by users.

If you want to see how I test an ad buy for a flat-rate text ad buy on AdBrite, check out the articles below. You’ll get an idea of the buying process from my point of view.
Buying Flat Rate Text Ads
Buying Flat Rate Text Ads Part 2

I’m glad AdBrite is still testing the possibilities of CPC ads. Since they removed the CPC text ads, I haven’t used their system as much as I used to. CPC banners should allow certain advertisers more of the control that is lacking from traditional CPM banner ad placements, which emphasize branding over optimization for ROI.

If you haven’t signed up for AdBrite yet, use the button to the left to register. The network is open to new publishers and advertisers. If you have any questions about AdBrite feel free to leave comments and I’ll answer them to the best of my ability. Thanks!

Good luck!

The Foundation

Driving a herd of sheep to a cliff and expecting them to pass the crevasse without a bridge won’t work. Knowing this, it’s obvious that driving more sheep to the cliff would just be more sheep without a means to cross. The sheepherder must build the bridge first, and build it properly. Making sure there is an clear and present means to the goal is what conversion optimization is all about.

Think of optimizing for conversions as the foundation for all of your goals. As marketers, we don’t build web sites and drive traffic to them purely because it’s fun and we enjoy entertaining the thousands of faces we’ll never meet. For the most part, it’s about building a site that somehow earns money. Whether it’s through advertising, sales, leads, clicks, whatever. Sure, the site can be fun and entertaining, but getting a user to ultimately click where we want them to is the golden ticket.

Once your site begins to convert for whatever goals you’ve defined, keep a solid eye on your key metrics. As Lance Loveday and Sandra Niehaus of WD4ROI point out, make sure you’re measuring the right metrics. For example, for those of you affiliate marketers who are interested in lead generation, you may be keeping an eye on your lead volume, conversion rate, revenue from leads, cost per lead, and revenue per visit. Depending on the type of site you’re running, you may need to keep an eye on differing key metrics.

The Conclusion

Optimizing for conversions is an essential step that every site owner must take before driving volume traffic to the site if the goal of purchased traffic is to increase revenue. In other words, you can purchase smaller volumes of traffic (or go by natural search traffic conversion stats), test, and make sure your site is converting before turning up the knob on the PPC dial. It just makes cents.

However, Wes Mahler listened to the criticisms (with which I agreed) and they’ve announced the launch of Prosper202, the self-hosted version of Tracking202. You can now download and host the application on your own server without compromising your data. I plan on checking it out very soon, and commend Wes and his team on stepping up and working toward creating a trust in the community.

If any of you try it out, let me know how it goes. I’m interested to hear your feedback. Feel free to send Wes feedback as well, as I know he will appreciate it. [Download Prosper202 here]

First, you must determine what your goals are for conversion. E-commerce sites may have a goal of sales in mind, a newsletter campaign may target sign-ups and try to “sell” the user with newsletter ads, an email submit campaign may want the user to fill out a short form, and so on. Determine your main desired action and make sure you’re able to track your earnings per campaign.

As I’ve mentioned before, it’s very important to know your numbers. There are key variables in your basic equations that will help you determine your baseline numbers — baselines such as your maximum cost-per-click (CPC), maximum CPA spend, and minimum conversion rate (CR). Knowing these three variables for any given month or quarter will really help guide you as to where to take your campaign.

*Basic Formulas*

Cost Per Click (CPC): Total cost / Total clicks

Let’s say for one month you spend $400 and get 1285 clicks. Your average CPC is $400/1285 = $0.31.

Conversion Rate (CR): Total conversions / Total clicks

If in one week you are able to convert 48 visitors into newsletter subscribers from 137 clicks, your CR is 48/137= 0.3504 or 35.04%. But keep in mind that for newsletter sales you must determine the CR for sales (total sales conversions / total sign-ups). Newsletter sales CR will be much lower than the sign-up conversion rate since it requires a purchase.

If you’re running an e-commerce, you’ll need to track total clicks and total sales conversions. Very important for e-commerce: make sure you’re driving the user to the most qualified landing page.

For affiliate PPC campaigns, if you’re not driving the user to your own site, or the conversion page is hosted elsewhere, you’ll need to make sure your affiliate manager has included your tracking pixel into the conversion page so you can track actual conversions. Contact your rep to see if they will accommodate this request.

One thing to keep in mind about CR is that it is a rate, and that you should over time know the average. This may help when estimating whether or not a campaign based on a flat-rate price will work.

Cost Per Action (CPA): CPC / CR or Total cost / Total conversions

Your CPA tells you what you’re spending per individual conversion. Raising your CR or lowering your average CPC will help lower your CPA. It’s all about balance…

Visitor Value: Total clicks / Total revenue

This is a number that you should not be overlooking. Determine what the average value is of each visitor, and you will know better what maximum you can spend per conversion.

Return on Ad Spend (ROAS): Total revenue / Total cost

This is pretty self-explanatory. However, find the balance where you are earning the highest profit. An ROAS of 10 is great, but in many cases it might mean you can spend more, as long as your other metrics are in check. For instance, wouldn’t you rather boast an ROAS of 7 if it means 20% more profit?

Conclusion

There are principles behind every metric — these aren’t just calculations that produce numbers you have to live with. You can influence each one. PPC is managed by crunching numbers, looking at the data, and making appropriate changes. Striking the balance between all the metrics and finding where you earn the highest profit is difficult but can be done with proper tracking. Understanding the principles of the formulas will help you shave down the excess fat and get the most out of your advertising dollars.

[Note: I'll try to get an advanced formulas article out to you guys. For now, check out the article on flat-rate text ad buys for examples.]

Anyway, when “doing” PPC, make sure to test all of your options, if for nothing more than to know if something doesn’t work. Here are some tips off the top of my head as I sit here lacking sleep, reflecting on ASW.

Go Through the Google Learning Center

You don’t need a Google AdWords Pro badge to prove you know PPC. (Which reminds me I need to put up mine.) However, the Learning Center will provide you with the basics you need to build a well-structured campaign in Google or any of the other major search engines. It’s the principles of building a solid campaign that matter.

Don’t Always Try to Be First

One of the most important things to keep in mind in paid search is whether or not your campaigns are earning a positive return. If your ad is in the top spot and losing money, but makes money in spot 3, what do you think you should do?

But Doesn’t Spot 3 Mean Less Clicks (or a Lower Click-Through-Rate?)

Yes. Remember, the top spot may garner more unqualified clicks just because it’s the first listing, driving up your CTR (costs) and lowering your conversion rate. That’s not a good thing, especially if you’re trying to be cost-conservative, or if you’re running a direct response (conversion-driven) campaign. Unless your ad really stinks or is completely irrelevant, you should still be able to get a decent CTR at spot 3. This is regarding search listings, not content listings. CTR has no bearing on those.

Use Google’s Website Optimizer

For multi-variate testing. It might not be because you’re getting unqualified clicks that you’re not converting — it could be that your landing page is really bad. The Website Optimizer will help you determine which sections of your landing page perform better by allowing you to rotate different variations of the different sections, and measure overall performance.

Spend Some Money

You won’t have any data unless you test some campaigns. And if your keyword’s minimum CPC is between $0.40 and $10.00, keep optimizing until you get it under $0.10. [Note: minimum CPC bid does not mean you will pay that amount. It is the lowest you can bid while still making it possible to be listed in the paid search listings.]

Do Your Math and Know Your Numbers

If you’re not good at algebra, you’ll have to get good. PPC involves a lot of calculating. Know your basic formulas and you’re good. Memorize them forward and backward. You should be able to do estimated calculations in your head. If not, I suppose you can use your calculator

What is your max CPA? Your max CPC? For newsletters, your average subscriber value? Etc… You will be able to keep optimizing your campaigns when you know these numbers. Remember, you can always do better, make more money, spend less per action, increase conversion rate, and so on and so forth. Maybe this is why online marketers don’t sleep…

Test All Your Options

When it comes down to it, test it all until you find what works. Keep doing what works and stop doing whatever doesn’t work. Wonder what day-parting will do to your campaigns and your traffic? Try it and find out. But monitor your changes. What will replacing a “.” with a “!” in your ad copy do? Test it and see. Just remember to monitor the changes you make and if something doesn’t work, revert back to the previous step.

The PPC mantra is much like SEO. Test. Measure. Tweak. Repeat.

• The 7 Habits of Highly Successful Search Marketing Campaigns: A Teaser

David Rodnitzky of Search Marketing Standard Magazine outlines his introduction to this topic, which he will be expanding on in subsequent articles. Like the 7 Habits of Highly Effective People by Stephen Covey, mastering these seven habits are essential for success, but not easily attained. I totally agree with his statement, “Paid search [marketing] is easy to do, but hard to do well.” For instance, anyone can sign up for Google AdWords, throw up some ad copy, pick a few keyword phrases, and bid $5.00 per keyword, right?

• How to Make a Million Dollar Website

Super affiliate Zac Johnson has given us a peek into how he earned nearly a million dollars over the span of only four months through one of his site projects. He was even gracious enough to let us in on some of his secrets. If you guys think it’s as easy as picking one product right off the bat and milking it forever, think again. Affiliate marketing takes risk, experimenting, thinking outside of the box, testing, and a lot of work to really make the big bucks. Hope to catch you at ASW, Zac!

• Surviving ASW, Las Vegas Sytle

Andrew Wee gives his Top 9 Tips on how to survive ASW next week. My personal favorite, “Get enough rest.” I don’t know I’ll achieve this one, seeing as how, well, we’re going to be in Las Vegas…the city that never sleeps. I added my two cents in his comments…noting ShoeMoney’s tip to stay at the conference hotel. Thanks, Andrew and Jeremy!

• How Many Things Can You Do at Once?!

Not only will there be a flurry of crazy activity going on in the expo hall and in sessions and during the mixers, but Converseon has thrown a scavenger hunt into the mix. It’s called “Where in the Summit is Converseon?” (A play on “Where in the world is Carmen San Diego,” for those of you who might remember that game!) It involves you, Flickr, Twitter, and your cell phone, and you can win one of five prize packages:

i. First prize: The Lifeform Ultimate High Back Executive Chair, valued at $2,695.00, from Converseon client RelaxTheBack.
ii. Second prize: The Spyke Spy Robot, valued at $369.00, and the VistaPix IS70 Digital Spotting Scope, valued at $479.00, from Converseon client Edmund Scientifics.
iii. Third prize: Two wine gift packs from Converseon client MyWinesDirect, the Best Cellers Cellars 2 Whites and 4 Reds pack valued at $99.95 and the Wine Gift Baskets-Vineyard Favorite Basket valued at $59.00
iv. Fourth prize: A 16-piece set of Gourmet Basics Red Berry tableware from Converseon client Mikasa, valued at $79.99.
v. Fifth prize: A Pan Tree, valued at $19.98, and a Can Dispenser Tote, valued at $9.98, from Converseon client GetOrganized.

I don’t know if I have the attention span to win but I can try! It would be pretty sweet though to win that chair from RelaxTheback.

• All Clicks Are Not Created Equal

Alan Rimm-Kaufman talks shop with Search Engine Land’s Danny Sullivan about how the Rimm-Kaufman Group buys clicks for their clients. I won’t go into summarizing the interview and articles leading up to this discussion, you should just check them out for yourself. But I will say that I agree on the point that it’s not always best to stick to a hard dollar budget. If your campaigns are getting a 800% ROI why stop them?

Hmmm. C’est la vie. I suppose I do see it now as an opportunity I was glad I milked. At least they were awesome enough to let us float through the holiday season, the highest volume period for my main client. Now it’s on to find the next under-the-radar system, whatever that may be… Time for me to do some homework…