MODEL 2: Cost per Click (CPC)
Cost per Click (CPC) is another model preferred by many advertisers. What you are required to do is to place some CPC system’s advertising banners on your website and start making money. It is as easy as I describe it. The system that displays the banners on your website decides what advertisements to show and how often to rotate them. You get a certain amount of money per each click made on the banner.
The sum may vary. Everything depends on the advertiser and the planned campaign. This type of advertisers has concrete goals – they do not want to simply squander a bag full of money to showcase themselves on a certain website. They want to attract visitors to their websites. That is why they pay only for the attracted consumers.
Of course, the thought of possible manipulation immediately comes to mind. You may earn pots of money by clicking on the banners yourself, don’t you? I have discussed this with different enthusiasts, who invent schemes that are even more complex than their websites in order to deceive the CPC systems and generate fake clicks on the banners, hundreds of times.
The truth is that there is no way to cheat such a system. Even if sometimes it may seem that you have earned money at their expense, it will be just for a short while, and you are going to be the big loser in the long run. Such systems have many highly complicated algorithms monitoring consumer behavior and assess the authenticity of every single click. Any abuse is immediately detected by these companies. The bad news is that once you are rejected as an incorrect website, you cannot get back to the system.
There are many CPC companies at the market. Using these websites you can really reach a big number of advertisers you have never even dreamt about with a simple one-time registration and installation of certain codes on your website, which takes minutes.
Speaking of CPC we cannot omit Google AdSense. This is a service allowing any website owner to make money from Google’s clients. While the local networks give you access to hundreds or thousands of advertisers, the biggest engine in the world will offer you millions. To understand how AdSense works, you should be acquainted with AdWords and with Google’s business model in general. As you have probably noticed, the biggest search engine in the world does not show banners with pictures that irritate consumers.
In October 2000 Google launched its AdWords service, which allows everyone registered to purchase advertising in the results of the search engine. However, the advertisements are not random but strictly targeted. The advertiser may choose how many cents to pay per click, under what keywords the ads to appear, what kind of consumers to be targeted and from what countries or cities, and many other parameters. This way, instead of showing one banner to one million consumers to attract 100 of them, who will command the advertised service, AdWords offers you a cheaper and more efficient option.
For instance, if you are looking for plumber’s services, it is logical to see ads for such services offered in your city, isn’t it? At the time, this was more than innovative. Thanks to its high efficiency and relatively small budget costs for a campaign, it became a most preferred method of adverting for millions of companies around the world.
However, Google has restricted the number of visitors and number of searches per day. To increase its advertising area, the search engine launched the AdSense service in March 2003. It allows every website owner to place a few lines of a program code on the website and then start making money from Google’s advertisers using AdWords. The principle of displaying advertisements on AdSense partners’ websites is identical to those of the search. The difference is that instead of searching, consumers enter a website that has a certain topic and the banners show information related to the website’s topic.
If we assume that you have a real estate website, the banners will be connected with real estate. However, if the consumer opens a page on your website that is connected to concrete offers for properties in London, for instance, then the advertisements will be connected with properties in London, and not properties in general. This leaves consumers with the feeling that these boxes are part of your website and not just advertisements.
What is more, after clicking on these links, they will enter a website where they find the information they are looking for, which, on the other hand, establishes a habit of clicking on these banners more often because they are really useful. Your profit is a small percentage of the price Google’s clients are paying. The price of each click is different for every advertisement and depends on tens of parameters, such as what country the clicker is from, how much time they have spent on the page, what keywords they used to enter the page, whether the consumer has clicked on other banners, what language settings they used, whether they have looked for similar information before, and so on.
Unfortunately, this service does not offer very good conditions. If your website is in a language different from the universal one – English, the price may be much lower and respectively your commission will be smaller. In some countries, the number of advertisers using this system is smaller (compared to other countries in the world) and often there is not enough adequate advertising for them. For instance, on the page with an article about cosmetics, the banner is showing links to websites of the kind “When will you die?”, “Electricity saving device” or “Upset digestion? Diarrhea?” These are real advertising messages – I hope that I will also manage to convince my publishers that this is so 🙂
Making money from cents…
The real profit in AdSense is accumulated from cents. If you think about how little you earn per click, you may give up on this idea before you have started. Yet, the system gives an opportunity for serious revenues. How serious, you may ask? What about $14,653 per month. This is a realistic goal. Some time ago I took part in a working group established to discuss ideas and models for better profit from AdSense. We discussed positions, colors, number of banners per page and different tricks allowed by Google, aiming to earn as much as possible with minimum efforts. One of the schemes that turned out really profitable is bypassing the problem with the traffic. Here is what I am talking about:
How to earn $14,653 per month?
Let’s do some math together! The sum $14,653, divided by 30, makes $488.43 per day. If we divide the sum by clicks, things will look like this:
Under a price of $0.10 per click, you need 4,884 clicks to get $488.43.
Under a price of $0.20, you need 2,442 clicks.
Under a price of $0.30, you need 1,628 clicks.
Under a price of $0.40, you need 1,221 clicks.
Under a price of $0.50, you need only 976 clicks.
Of course, there are clicks that can bring you up to $2-3 but you should not make your prognoses based on this option. The above-mentioned indicative prices are absolutely real. This calculation, however, is valid only if you have only one website. As you already know, to some extent your websites may cost you absolutely nothing, so let us imagine you have not one but three websites and do the math again.
Under a price of $0.10 per click, you need 4,884 clicks or 1,628 per website.
Under a price of $0.20, you need 2,442 clicks or 814 per website.
Under a price of $0.30, you need 1,628 clicks or 542 per website.
Under a price of $0.40, you need 1,221 clicks or 407 per website.
Under a price of $0.50, you need 976 clicks or 325 per website.
Now it is time to introduce you to a parameter that will be of key importance, no matter how you sell you advertising. This is the Click-through rate (CTR), i.e. the ratio between the number of certain banner’s displays and the number of clicks on it. It is important to know what the CTR of your banners is so as to make better prognoses about your revenues. Since you already know how many daily clicks you need to achieve the cherished goal based on presumed CTR, you can calculate how many banner displays you need to generate the desired clicks and, respectively, how many visits on the website.
When selling advertising on CPM, or let us say impressions, the client should be happy to reach 0.5% to 1% efficiency (CTR). When selling advertising per click, especially with AdSense, things are a little bit different. Since the advertisements are very well selected to fit your website, they generate many more clicks. You may expect a CTR of 5% to 20% and this is not something unusual.
Let us take the example with the 407 clicks needed per day per website.
Under a CTR of 2%, you need 20,350 impressions.
Under a CTR of 4%, you need 10,175 impressions.
Under a CTR of 6%, you need 6,783 impressions.
Under a CTR of 8%, you need 5,875 impressions.
Under a CTR of 10%, you need 4,070 impressions.
Under normal circumstances, consumers examine between 3 and 5 pages of your website, or in other words, they make 3 to 5 impression per visit. These are average values you can count on. Depending on the type of the website, it is possible to have 15 or more impressions per visit. If we take the value of 4 impressions per consumer, you will need 1,017.5 consumers for your three websites a day. If you have only one website, you will need 3,052.5 consumers a day to reach your goal.
The sum in question is deceivingly tempting but I will have to disappoint you. An entrepreneur can be easily deceived by such calculations and come up to the conclusion that since they need 1,000 consumers to earn certain sum, they may create 100 websites and attract 10 consumers per day per website or 10 websites with 100 consumers daily. Together the number of the people visiting the websites will reach 1,000. In the end, creating a website that attracts 10 people a day is much easier than creating a website attracting more than 1,000.
The shortcoming here is the quality of consumers and websites. Quantitative change leads to qualitative change, German philosopher Georg Hegel says. This may be the driving force of evolution and natural selection, according to Darwin’s theory, but unfortunately, we cannot count on it for our online business initiatives.