In my earlier post on Getting Traffic I described some of the elements that go into getting visitors without having to pay for them. Here I will discuss briefly paying for visitors.

First let me say that free traffic is better. This is a new blog in a very competitive market — I haven’t even posted 40 messages yet (this is the 39th). I started in mid-November, and averaged 10 visits per day for the last two weeks of that month. In December I averaged 30 visits per day, averaged over the month. Now, three weeks into January, I’m averaging 50 visits per day for this month. I have not paid for any traffic to this site — the cost is too high for this market, and as of yet I haven’t even offered anything for sale, it would be wasted money. So long as the stats keep moving in the right direction I will be satisfied with natural traffic.

However, for some sites, it is worthwhile to pay for traffic. I am not talking about paying those cheesy 10,000 visitors for $10 junk sites. I’m talking about advertising. People talk about buying ads, but the ads themselves have no value — we aren’t promoting brand recognition here, we are promoting websites. Ads are only worth the profitable traffic they generate.

To know which ads are generating profitable traffic, you need to know:

  1. How much traffic comes from that ad
  2. How many of those visitors buy your product
  3. The average lifetime value of your customers

For #1, simply look at your stats, and see how many have the referrer from the site and page you are advertising on. Some ad sellers providing tracking information (especially if it is pay-per-click) as well.

#2 is a bit more difficult, you need good tracking software to keep tabs on the conversion rate. You can make your own tracking software by adding a simple random variable to the ad URL (e.g. www.mysite.com?t=1263) then pass that $t value through to your order form. That will only track immediate sales, not those who bookmark your site and return later to buy, but it is much cheaper than the tracking software.

The third value, average lifetime value per customer, is something that changes over time, and needs to be tracked with good accounting records. At first, when you only have one product, the lifetime value is equal to the sales price of that product. But you need to develop more ‘back end’ or related products, to really make money. Once you have established a relationship with a customer through their first purchase, they will be like gold in the bank for future purchases, so long as they are highly satisfied with their first purchase.

Once you have gathered the above information, simply look at the cost of the ad, divide by the number of paying customers it generates and subtract that from the average lifetime value of your customers. The higher the value in the lifetime value - ad cost equation the better. If that value is negative, the ad costs more than it is worth.

I have just added a sign-up form for update notices, please sign up. Right now I’m thinking there will one email per month, with descriptions of what I consider the most important posts in the preceding month, and perhaps an occasional product announcement (list members will get a discount offer). I will not be flogging affiliate products on that list.