Andy Black
Help people. Get paid. Help more people.
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Watch this 6 minute video if you do any paid advertising, or are considering it.
View: https://youtu.be/of3JgwUCxqU
EXAMPLE
You're spending $100 a day for 100 clicks, and making $50 revenue from 2 sales.
Metrics:
Cost = $100
Clicks = 100
Sales = 2
Revenue (Earnings) = $50
Calculated metrics:
Profit = -$50
cost-per-sale = $50
revenue-per-sale = $25
Or another way:
cost-per-click (CPC) = $1.00
earning-per-click (EPC) = $0.50
You're losing money. So drop bids until your CPC is $0.50. Then you're running breakeven. (This assumes the traffic quality remains constant and doesn't get worse.)
You'll lose ad position, and your Impression Share and ad CTR will both drop.
I'd guess you'd end up with a quarter to an eighth the volume of inbound clicks. So about 12 to 25 clicks.
So you're break-even, but have lost volume.
Now get into a continuous cycle of fixing leaks in your funnel, and increasing visitor life-time-value (LTV) so that your EPC increases. Each time you do that, you can increase your bids and drive more volume.
Apart from the initial budget to buy data and determine your EPC, there really is no reason to lose any money.
You just keep dropping bids till you're break-even or are profitable.
You may have to drop them so low you get no volume... in which case you get no clicks, and therefore have no costs anyway.
EXAMPLE
You're spending $100 a day for 100 clicks, and making $50 revenue from 2 sales.
Metrics:
Cost = $100
Clicks = 100
Sales = 2
Revenue (Earnings) = $50
Calculated metrics:
Profit = -$50
cost-per-sale = $50
revenue-per-sale = $25
Or another way:
cost-per-click (CPC) = $1.00
earning-per-click (EPC) = $0.50
You're losing money. So drop bids until your CPC is $0.50. Then you're running breakeven. (This assumes the traffic quality remains constant and doesn't get worse.)
You'll lose ad position, and your Impression Share and ad CTR will both drop.
I'd guess you'd end up with a quarter to an eighth the volume of inbound clicks. So about 12 to 25 clicks.
So you're break-even, but have lost volume.
Now get into a continuous cycle of fixing leaks in your funnel, and increasing visitor life-time-value (LTV) so that your EPC increases. Each time you do that, you can increase your bids and drive more volume.
Apart from the initial budget to buy data and determine your EPC, there really is no reason to lose any money.
You just keep dropping bids till you're break-even or are profitable.
You may have to drop them so low you get no volume... in which case you get no clicks, and therefore have no costs anyway.
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