For any system to work effectively and produce profits, accounting is a must. We must have clear understanding of our expenses and income generated. If we do not keep track of it, we can’t refine and optimize our system in the online business.
I’ll provide you formulas which can help and guide you through in order to refine your system and generate consistent profit. There is some online terminology which you all must understand to be successful and drive profit from your online business. I’ll explain the ones used in the formulas. Don’t worry you will be able to understand all the Internet/Online business jargons in the 14 Days FREE video series specially designed for my readers. And you can get Instant Access to here. In this Video you’ll be guided by the best in the industries trainers, seven-figure earners, step-by-step.
Now let’s understand the numbers and learn how to find what works and what doesn’t work.
You will have to understand this to ensure you do not drain money out of your pocket, which is very vital these days as there are money marketers taking advantage of people like you to promote their products on your expenses and make money out of it. I have been victim of these and DO NOT want you to fall in the same trap.
I’ll explain each and every formula in the above picture below, please pay close attention to the fundamentals of the online traffic.
As I explained above that the most important activity in online business is to drive traffic to your Landing Page/Website. In the beginning of our Online Business journey we do not have a big list of our own customers, and other free sources of traffic (writing blogs/articles, creating YouTube Video, writing e-book) take some time to work on it. For starters and even builders generating traffic from free source is very challenging. The best way to start for starter is to buy traffic from the one of the sources mentioned above. I have taken an example of a banner ad. The same formula applies to the Facebook, Google Adwards and other traffic sources which you will learn in details in the FREE video training that can be accessed anytime from the links provided in Chapter 9 of this e-book...
Here we go, you will buy traffic from somewhere one day, suppose you will spend up $1000 (you can start with as little as $2 or $5) for banner ads at abc.com at $5 CPM (CPM stands for cost per 1000 impressions)
$1000 spent on $5 CPM Banner Buy on abc.com
$5 will generate 1000 impression, so $1000 will buy for you ($1000 /$5) 200 $5 CPM banner ads, which yields (1000*200), 200,000 impressions of banner traffic.
In the online advertising 2% - 5% of CTR (Click through Rate – number of people click on your ad and visit you Landing Page/Website) is considered to be standard conversion rate.
Suppose 200,000 Impressions yield a 3% CTR which means 3%200K = 6000 clicks
With 6000 clicks the offer gets 1% conversion ratio on a sale (just 1% people out of 6000 buy your product), which means 60 sales. Each has a CPA (Cost per Acquisition – What you are paid if sale happens) of $50. You will be paid $50 x 60 = $3000, The Total revenue is $3000. You made $3000 from 60 sales at $50 CPA. This doesn’t include the expenses you made to drive traffic.
It is important to understand if we made profit and refine the system to generate better profits. Since the clicks on the banner ad influence our earnings, it is important to understand what we spend per click on traffic. In this case The EPC (earning per click) is $0.50 ($3000/6000 clicks),i.e. the amount you madehas been divided by the number of clicks you got. The ECPM is $15 ($3000/200M( M stands for Impressions))
At 3% CTR you made $3000, which is pretty good. You made a profit of $2000 on spending on $1000 on traffic. 300% profits… cool.
What if the CTR is 1% vs 3%?
At 1% CTR, 200,000 impressions yield 2000 clicks, at 1% conversion, 20 sales are made, which generate $50*20= $1000 in revenue, your EPC is $0.50, your ECPM = $1000/200M = $5.
What if the conversion ratio on the click is 0.50% vs 1%?
Yields 2000 clicks, at 0.50% conversion 10 sales are made, revenue is $50*10 = $500, EPC=$500/2000 = 0.25, ECPM = $500/200M = $2.5.
The above formulas will guide you whether your campaign is doing good or requires a tweak and refining to improve the numbers and the profit. If the banner ad yields a CTR lower than (<2%), your ad is not impressive to the audience. There could be two reasons to it; (a) Your Ad is not presented to the correct audience or they are not interested in what you are offering them, (b) Your Ad (Image and/or content) is not of good quality or doesn’t convey the message to your audience. Your audience is not connecting to what you are showing to them.
And if conversion (sales) is lower than 1%, your landing page requires some work. Lower conversion rate means customers are clicking on advertisement and landing to your Landing Page/Website but going away without making a purchase. You will have to analyze the page and the ad copy to understand the reason of lower conversion. May be your ad copy and Landing Page/Website are not congruent. Customers may be getting mislead by the disconnect in the ad copy and the main site.
Don’t get panic, don’t worry, in the 14 Days FREE training video program we will teach you how to track your traffic to get the above details. We will provide you guidance on what tools to use for optimum results. There are tools available which provide the behavior of customers who come to your site, what they actually do, where they click, which portion of your page they pay attention to, which portion of the page they just scroll through etc. and this will give you an idea on what area of your landing page or website requires modification. We will provide and assist you step-by-step in the training to make you successful in the online business industry. Please feel free to get your access activated, details are provided in Chapter 9. We shall be delighted to see you inside and help you breakthrough in online business and in life. See you inside!