Like math? You better learn to.

Which option?

  • Option A

    Votes: 230 24.2%

  • Option B

    Votes: 408 42.9%

  • Option C

    Votes: 122 12.8%

  • Just tell me, I'm too stupid to figure it out.

    Votes: 192 20.2%
  • Total voters
    952
Mike

Mike

New member
Jun 27, 2006
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On the firing line
For the math retards out there and people that claim to hate math, you need to get on the ball. If you want to make money in this industry, math is the single most important skill available. Yes simple math. Not coding, not design work, not even content building but plain old math.

Here's why:

You have $500 to spend and you're considering different places to spend it. The offer you are promoting pays $20, and the CPA company claims that it converts at 4%

Option "A" - Banner that gets 5,000,000 impressions monthly, costs $500, and has an average CTR (according to the site owner) of 0.025%

Option "B" - PPC campaign where the clicks will cost $0.20 each

Option "C" - CPM banner on a popular site, costs $0.35 CPM. Over the course of one month, you can expect to get a maximum of 1,000,000 impressions

So, what are some of the numbers you need to know to make an informed decision?

Also, which option is the best?

I'll post the answer later today.
 


Fuck, I clicked the wrong button on the vote, Option A, unless the Network is lying and it doesn't really convert @ 4%.

Also depends on how relevant the traffic is. Option B may actually be the best option despite being less overall traffic if your traffic is super targeted, versus the speculative nature of a banner ad.
 
Assume all traffic is closely related and relevant, this exercise is just based on the numbers.

Also, whether or not a network is lying, you are rarely going to have the same conversion rate that the network shows. Remember, the network conversion rate could be high if only a few people are running it and they have the niche just nailed, or it could be low if there are a ton of "lesser" affiliates running shitty traffic through it.

I always figure conversion rate at about half of what the network claims if it's anything over 5%. If I can make money at my lower, estimated conversion rate, then I'll test it out.

/edit/ actually, thinking about it, most of the time I figure 1 - 2.5% when estimating potential revenue and profits. Until I have some historical conversion rates, I always start out guessing low.
 
Should we assume that we can spend our whole budget on the PPC campaign ?
Could we get a CTR estimate on the option C cpm banner ?

Ill go with B for now ... unless the cpm banner has a very high ctr
 
Well, Option A, if the site owner is correct, will get you half the traffic of Option B.
Option C will only cost you $350 if you're putting the max at 1,000,000 views will get you less than traffic than Option A as well, but it'll get it cheaper per unit.

After all, Option C is converting at a rate that let's you basically say the CPM is the CPC cost according to this math...

So at 4%, and $20 a pop, my money's on Option B for a 400% ROI.

But why do I get the feeling I'm wrong here?
 
Option C generates $8000 on $350 spend. So option C unless option B generates more than 10,000 clicks/mo.
 
Option A: $1000 on $500 spend = 200% ROI

Option B: $80 on $20 spend = 400% ROI

Option C: $800 on $350 spend = 229% ROI

BTW, math is awesome, stats specifically :D
 
Option B seems like the best choice based on the figures you provided, professor.
 
B should be the correct choice based on the limited information.

My point in posting this was just to get people thinking more about the numbers. If you're not wearing out calculators and / or have a spreadsheet open at all times, then you're going to leave money on the table. Everything we do here revolves around numbers.

Affiliate companies want you to send xxxx amount of traffic to get paid $xx.xx. You may only have a limited ad spend. Etc, ad infinitum.

Another thing to consider and keep in front of you is ROI vs. Scalability.

You'll find some places that give you a wicked return, but you can only throw so much money at it before it's maxed. Then there are other places that you can throw a shitload of money at but give you a lower ROI.

So, if your budget is $10,000 and you can advertise on Site A and get a return of 3:1, BUT the most you can spend there is $500 OR advertise on Site B, which requires a minimum ad spend of $10,000 (minimum, the maximum is unlimited) and will likely only give you a return of 50%. Which do you do?

Well, if you decide to go with A, you'll make $1500 on the initial $500 investment. You'll still have $9500 to play with. If you go with B, you'll spend $10,000 and make $15,000. Then you take that $15k and reinvest, making $22,500, etc, etc.

Back to site A, you still have $9500 you want to spend, so what to do with it? Start looking for places that have an unlimited ceiling and a lower initial investment? Find 19 other places that can give you a 3:1 return?

The choice is yours, and both choices have their pros and cons. Point is, keep scalability in mind whenever you choose to advertise somewhere. I'm not saying that you should avoid the places with a low ceiling, just be aware of it so you're already working on your next deal.

Even more math...

Pay attention to your CTR versus Conversion Rate. I've personally had ads (recently in fact) that absolutely killed it CTR-wise. Literally 10x more CTR than any of my other ads, but it didn't convert. Found some ads that converted like crazy, but the CTR was horrible. Didn't matter though, the low CTR / high conversion ads gave me the best days I've seen on that network. Don't get too caught up in the CTR game. Sure you need to pull people off the page, but more importantly you need to convert them.

Fuck, it's late and I'm starting to ramble.

Oh, before I go, here's the spreadsheet I have open 24/7 for quick calculations. If you're not using something like this, take mine, or build your own. If you don't understand it at first, just look at the calculations I'm using. The colored cells are the only ones you need to change.

View attachment cpc-calculator.zip
 
Hah, i forgot to divide the 0.025 by 100 for Option A. Yes kiddies, this is exactly why you should always have a template spreadsheet when evaluating a campaign. Human error can really screw you ;)

R = (5,000,000 * (0.025 / 100)) * 0.04
 
Thanks for the spread sheet, I've been trying to make my own decent one for awhile. Up until now, all of my math has been by hand. +rep
 
JamesH said:
Thanks for the spread sheet, I've been trying to make my own decent one for awhile. Up until now, all of my math has been by hand. +rep
Click to expand...

I have a friend that has literally worn out buttons on his calculator in a matter of months. Amazingly, the calculator still works.
 
Thanks for the spreadsheet i'm sure it's better than the one i've been using!
 
glew77 said:
Thanks for the spreadsheet i'm sure it's better than the one i've been using!
Click to expand...
Maybe, maybe not. It's tailored to what I want to see. Sorry guys, I didn't change it to anything special for Wickedfire, but at least it's a starting point. Actually, this is probably the 12th edit of it since I started using a spreadsheet vs. a calculator.
 
Major in computer science, dual minor in mathematics and business law.

I rarely pull out a calculator though, I just have a good feel for marketing and the response I'll get to different ads.

Made $28,400 so far on the stupid WordPress plugin I wrote last month with free posts like the Buy Sell Trade forum here. What's the calculation for that?
 
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