Thursday, May 29, 2008

CPM, CPC, CPA – Which are the Real Money Makers?

There are three basic types of online ad, in terms of revenue:

CPM – Cost Per Thousand Impressions
You serve 10,000 impressions of an ad at a rate of $5 CPM, and you’ve made $50.

CPC – Cost Per Click
You serve 10,000 impressions of an ad at a rate of $5 CPC, and its clicked on five times, and you’ve made $25.

CPA – Cost Per Acquisition
You serve 10,000 impressions of an ad at a rate of $5 CPA, and its clicked on five times, and one person signs up for an account on the advertiser’s landing page. You’ve made $5.

Notice the progression. The CPM ad required just one step – ad delivery – before you made money. The CPC ad required two steps – ad delivery, plus customer click – before you made money. The CPA was worst of all – not only did you have to deliver the ad, and not only did the customer have to click on it, but they had to complete an action after all that before you’d see a single red-cent.

Now, this is where a lot of folks will say I’m crazy. There are oodles – OODLES I say – of web entrepreneurs out there who claim to make tens of thousands of dollars a month from affiliate marketing (essentially, CPA ads). They say that its all about testing each opportunity and then going full-speed with those that work best for your niche. They say that once you’ve found those 2 or 3 CPA campaigns that convert well for your sites, that the money just flows in.

That may be true for them, but its never – NEVER – been true for me. Not once in thirteen years of online advertising have I ever made significant money from a CPA ad campaign. Unless you’re in a very specific niche that just happens to be a haven for CPA campaigns (ring tones, for example), CPA’s are a pipe dream. I don’t bother with them. Ever.

CPC’s are a bit of a grey area for me. For years I avoided CPC ads – that is, until Google came around and completely turned the CPC business on its head through relevant, contextual advertising. The only CPC ads I run are Google Adsense, because they have an enormous reach and because their ads are always contextually relevant to my audience. Because of that, my visitors click the ads, and I make money. Not boatloads, by any means, but on certain sites and in certain niches, Google Adsense adds a significant percentage to my daily numbers.

Needless to say, any CPC campaigns that are not contextually targeted – ignore them. No one will click on them, and you’ll serve 5 million impressions and pull in about twelve bucks for your troubles. Not worth it.

CPM ads. These are my bread and butter. I love CPMs. On many of my sites I will run CPMs and ONLY CPMs. They’re constant, they’re steady, and you always know what you’re going to get. This is the workhorse of my little mini-economy. I’ll generally run anything that’s over $0.50 CPM on my sites, though I regularly have campaigns that pay upwards of $7.50 or more CPM. The overall numbers seem small compared to the mini-fortunes that some CPC/CPA networks will “promise” you, but unlike those pie-in-the-sky offers, CPMs pay out every time.

If you’re new to online advertising and not sure what type is right for you, I’d say, stick with CPMs for the most part, and do some small-scale experimentation with Google Adsense. All other CPC/CPA campaigns are essentially – in my point of view – a waste of time. Unless you’re in a really particular niche that is known for CPAs, its just not worth the effort.

Monday, May 5, 2008

Self-Sustaining Web Sites – Passive Income with Minimal Maintenance

In a previous post I explained why I thought blogging was a time-sink and an awful way to make money online, and I said that my goal was to build 100% self-sustaining web sites that can run on their own without needed constant updates and maintenance. Well, that’s all good and well, but what exactly is a self-sustaining web site?

First, we have to look at what makes a visitor come back again and again to a site. Its one word. Value. If you offer something of value to a visitor – information, amusement or entertainment, a social atmosphere, or a useful tool – they will come back to your site time and time again.

In my time, I’ve built informational/content sites, game sites, blog sites, forum sites and e-commerce stores. I’ve had the least amount of success with e-commerce, and generally-speaking, I’m done with it – I don’t see myself ever fiddling with that again. Selling products online to me isn’t Passive Income – every sale is work you have to do. Work to get the product, wrap the product, ship the product, process payment, process returns, deal with defects and shipping problems, etc. Who needs the hassle? So for me, e-commerce sites are out.

Blog sites, like I mentioned earlier, aren’t that much better. Having to write 1-2 original posts a day is work, plain and simple, and its not Passive Income. (There is a work-around for this, however, but I’ll talk about this a little later).

Informational sites are great, but only if you have enough original and insightful content to completely corner the market on a specific niche. I’ve been able to do this only once with an informational site, and it wasn’t easy. In fact, the amount of hard work it took to get there more or less precludes me from every trying this again. So while I do currently make Passive Income from my informational site, if you consider the thousands of hours I spent over more than twelve years to compile all that information, it starts to look more and more like Active Income. And that’s a no-no.

Forum sites… now we’re getting somewhere. A forum is a community of people communicating with one another, whether you’re around or not. What could be more perfect? The site gains more and more original content each day, with every new post and every new member, and each visitor gets value out of the site not only from the content within but from the sense of community and partial-ownership that each forum member feels when participating in the conversation. To me, a successful forum is just like a snowball… keep the forum running fast and bug-free, make sure you’ve got a couple of hard-working and even-minded moderators manning it, and its essentially a set-it-and-forget-it cash machine.

But for me, the most successful sites I’ve even made have been game sites. Obviously, not everyone can do this – you need to be able to do at least medium to high-level programming in order to pull it off (or, you can hire someone to do it for you). But if you can put together a game site where players can register accounts and compete against other players for high scores, and if its well-designed and fun to play, you’re in the zone, mister. Competitive game sites are great for Passive Income because once you create the games, they’re essentially done – you don’t need to tweak them or update them, or really do anything. Folks will come and play, and those who register to compete will get their competitive juices flowing and return again and again to make sure their scores are on the Hall of Fame.

For me, forum/community sites and game sites have been the single biggest earners for me. Not only that, but they’re completely, 100% self-sustaining. All I need to do is keep an eye on the server and make sure things are running fast and smoothly for everyone. I’ll go for days, sometimes even weeks at a time without doing any significant work on a site – if you program them well, you’ll almost never have to.

And that’s the key. Because there are only so many hours in the day, you’ve got severe limitations on how much Active Income you can make in a lifetime. But if you’ve got multiple streams of Passive Income coming in every day, with minimal or no work on your part, there’s practically no limit on what you can pull in every month.

So before you start your next web site, ask yourself – is this going to be self-sustainable? And if not, how can you make it so?