How To Lose Money With AdWords
June 4th, 2008 - Jarkko
It’s time for another report on the “make money online” challenge. This time we will take look at all the money I lost in May, and see what you can learn from my mistakes.
Luckily, the sums are still small, and while in the end I didn’t make any profit, I didn’t lose either, just ended up with zero revenue.
(Photo on the left by Tracy Olson)
So, what happened?
Where does the money come from?
At the moment, all my online earnings come from one of two sources: affiliate marketing and freelance blogging. Freelance blogging is pretty straightforward: if I write blog posts, I get paid. So today, let’s concentrate in the trickier one, affiliate marketing.
Photo by Roadsidepictures
As an affiliate marketer, I am kind of a shop keeper: I sell stuff made by others and get a percentage of the sales price.
Visit my web store, the Insanely Interested Store to see what I mean:
If you buy a product from the store, some of the money goes to me (something between 30-50 percent of the price) and the rest goes to the person who made the product. This way it’s just the same as your local Wal-Mart and there’s nothing special about affiliate marketing.
Then again, most of us don’t have the experience from successfully running an offline store to guide our affiliate marketing efforts.
Where do the buyers come from?
This is where it gets more interesting.
Photo by gynti_46
Naturally, some of the purchases come through this blog. You read a post, see that I like a product and recommend it, and then go and buy it (or you click on a banner on the front page or at the end of a post on the RSS feed). To me, this is great, because all I need to do is to find great products and write interesting posts mentioning them. No money lost at this point.
The problem is that this approach won’t make me rich.
While it works pretty well for someone like Darren Rowse who has tens of thousands of subscribed readers and a huge traffic every day, it still won’t pay my bills. At least not yet.
So, I need to find more buyers, and that’s where advertising comes to the picture. Just like Wal-Mart, I have to advertise my products to make people notice them, come to my store, and finally buy them. And to do this, I am using Google AdWords.
In AdWords, the price of advertisement is counted as cost per clicks and determined through bidding: The one who pays the most for a keyword gets the best ad position for that keyword.
Let’s look at an example:
I wanted to speed up the sales of Nick Cernis’ e-book, Todoodlist, so I created an ad for it:
I set up a few keywords for it, and started the campaign. I started receiving clicks right away, and according to AdWords, on average, I paid $0.27 for each of them. That doesn’t sound bad, does it?
By creating compelling ads, and paying Google to show them, I can get visitors to come to my store.
So, what’s the problem?
Return on Investment
There is a concept in marketing called Return on Investment (ROI for short), which means the money I get in return for the money I spend in order to get a customer to buy. And in practice, all that this means is that if you want to be successful, you’d better keep your ROI positive.
But there was something else, I didn’t pay enough attention to when I started working on this challenge: conversion rate. Hear what Terrence Chang says about it:
1. The average conversion rate for online store is 1%. It means there will be one buyer in 100 unique visitors.
2. Most of the small online store has conversion rate lower than 0.1%. It means there will be one buyer in 1000 unique visitors. This is very low conversion rate.
He talks more about this in his blog posts, so make sure to check it out. But now, let’s do some math:
If I buy $0.30 for a single visitor, hundred visitors cost me $30! And, to be honest, my online store is a small one. So, $0.30 x 1000 = $300!
Now, if you look at the products I’m selling in my store, you’ll see why this is a problem:
- Email Zen – $6
- Escape 101 – $9.95
- Todoodlist - $14
- How To Be a Rockstar Freelancer – $29
- Fresh News WordPress Theme – $99.95
None of the products cost over $300, so with a conversion rate of 0.1% and an ad price of $0.30, none of the products would be ROI positive. Even with a conversion rate of 1%, the Fresh News WordPress Theme would be the only product to bring me revenue.
So, what’s the solution?
I have three options: (at least that’s how many I could come up with – let me know if there are more)
1. Improve the conversion rate
While my conversion rate is not perfect, it’s luckily already much better than the 0.1% mentioned above (not better than 1% though). That’s mostly because of the traffic coming from my blog: It’s easier to sell to people who know and trust you (a trust that I can’t afford to lose).
But I can improve on this by making my product landing pages more appealing, having more exciting new products, and making it real easy for the shopper to buy the product.
2. Pay less for advertisement
This can be done in two ways.
First, I can stop paying for advertisement: It doesn’t make sense to buy ads for a book that costs $6 and brings me $2 in revenue.
For the more expensive products, it still might make sense to buy ads, but by picking less competed keywords, try to keep the Cost Per Click as low as possible. Of course that also means that it can be harder to get the ads noticed by people, but at least it’s not too expensive.
3. Find more expensive products
This last option is the one most often recommended by serious affiliate marketers.
Following the advice from Gobala Krishnan’s affiliate marketing e-book, Super Affiliate Blogger, I’m now looking for some affiliate products to sell with high enough profits to be able to effectively use keyword marketing. Most likely these products won’t be sold in the insanely interested store, however.
The store is all about affordable products for the insanely interested. Products that I have found useful, or that I enjoy a lot, and want to share with you guys.
So, as you can guess, my plan is to attack all of the three options, and take on an exciting new adventure in the world of affiliate marketing!
And just as so far, I’ll keep you posted on how things proceed on this front as I learn more.
New Book from William Profet
And finally, before I open the stage for discussion and comments, I want to mention a new book from William Profet, The Top 77+ Inspiring and New Ways To Make Money Online. I just started reading it and it not only looks interesting but also fits this post’s theme perfectly.
Good luck to everyone on this adventure of making money online! We can make it!
Don’t forget that there are ways to use AdWords efficiently. You could get a better ROI.
Good luck to you too. I just got my first niche site (that could get me some money) up and running.
Thank you for mentioning my observation about conversion rate. I have stop paying AdWords for a while and my revenue is growing. I also got higher conversion rate because of less traffic from AdWords. As Bitten mentioned above, there are ways to use AdWords efficiently. To be honest, AdWords is all about picking the right keywords. After the visitors land on your landing page, you are still on our own.
There are few facts about using AdWords.
1. The right keywords means $. The keywords have to be relevant to your landing page too. You can use really cheap keywords phrase such as “keep iPhone clean” or high price keywords such as “iPhone screen protector.” However, you get the same results of zero conversion rate, because your landing page is selling hacked / unlocked iPhone. People, who already have iPhone, are looking for screen protector, they will not be interested in buying another one.
2. The AdWords on content network are abused. There are so many cheater who make fortune on showing your ad on their irrelevant content network. Your iPhone screen protector Ad is showing on XBox and LCD TV review sites. People click on your Ad, because your Ad looks interesting. They don’t have intention to buy iPhone screen protector.
3. Your competitor are clicking on your Ad, because your ads are displayed on their alias content network to promote their own products and which cost you money.
My few suggestions to you, if you really want to use AdWords.
1. User three words key-phrase in different order. For example. Use “protect iPhone Screen” instead of “iPhone Screen Protector”.
2. Don’t put Ad on content network. Put on search engine only.
3. Know your competitors and exclude their web sites to display your Ad, if you still want to put on content network.
In my case, I got 75% of click from search engine and 25% from content network. I got up to 3% conversion rate from search engine and 0 % conversion rate from content network. You get the points.
My true suggestions to you to boost your traffic are all about SEO. Your Insanely Interested store page don’t have any meta data, which is bad.
1. Work on the tile, meta keywords and meta description of your landing page
2. Increase the density of your keywords on the landing page, but don’t abuse.
3. Link building on your own content network to promote your own store. Combined using wordpress.com, blogger.com, Live Journal and AOL Blog. Those are the sites that get Google Indexed fast.
4. Forget about increase your Page Ranking. It’s wasting time.
Your long term traffic should come from all search engines. Not PPC Ads. I hope you get my points. I can’t give you too much about conversion rate, since I am still learning myself.
Good luck! Making money online is fun!
Terence Chang’s last blog post: Entrecard – Should it stay or should it go?
@Bitten: Thanks! I’m sure I’ll still experiment more with AdWords – I’m not giving up on them for good, and the tips that Terence gives above sure sound worth trying – just not with these products.
@Terence: Wow, you put a lot of effort in this comment! Thanks for all the insight, it’s really appreciated!
The tips you give on adwords make sense, and I’ll definitely try them on some landing pages – not right now though. First, I’ll devote some time to the SEO things, as you suggested.
And the biggest a-ha moment of all, that was your last point about link building on many blogs of my own. I have noticed that you have lots of blogs – and I was wondering why. Well, now I know – and I’ll definitely have to try it too. :)
Jarkko:
Yes. I put a lot of efforts on the comment, because I think your blog deserve it. I want you to become my next success entrepreneur case study. I am willing to help people out, because I believe they will help me out one day.
I learned all those tricks the hard way. I was eaten by marketing companies, which I paid to do all those things that I can do myself for free. Yes! You may save time on getting those things done by hiring the marketing companies. At the end, all you got is the traffic and back links on someone else network. You have nothing left behind to expend your own empire.
I am seriously building my social appearance. You can find me everywhere by searching my name on Google. :-) No marketing company can do that for you! :-)
Terence Chang’s last blog post: Entrecard – Should it stay or should it go?
I think it’s great that you’re sharing your affiliate experiment, Jarkko — well done for being so open about it.
There is an art to writing AdWords ads. When I launched Todoodlist, I ran an AdWords campaign that generated roughly a 2% click-through ratio. I hired a copywriter with a talent for sales copy, and the CTR more than doubled overnight.
It’s all about benefits. You have to pack in the actual benefits of whatever product you’re selling in as few words as possible and condition people to take action. If you’re going to continue playing with AdWords, I’d recommend you do some research on how to write great ads or pay someone to write them for you (not that your example was bad, but I know from experience that a benefit-rich ad would convert better).
Some other things worth considering:
1) I’ve found banner ads on well-chosen, related sites to be more effective than AdWords in certain cases, particularly when dealing with niche products with a fairly narrow appeal or at products aimed at the particulalry computer savvy crowd (who tend not to click on search ads as much)
2) I also recommend (relatively) discrete banner ads at the foot of pages before the comments section to reinforce whatever message or sales drive you have higher up. It’s a natural place where readers stop to take action, and it converts pretty well. I spent 3 months experimenting with placement, and ads in each post footer really work for me. The famous statistic is that viewers have to see your ad seven times before taking action. It’s why smart companies run campaigns across many forms of media. Online, that translates to ads on multiple related sites, or in multiple areas on the same site.
3) Consider creating your own product. This was the clincher for me. I didn’t write Todoodlist to get rich (although it’s doing well), but the natural act of switching my tact from affiliate sales to writing a book on a subject I’m passionate about after I’d built a big enough audience has been a great experience in itself, both financially and in other ways. It’s created opportunities I’d never have had through affiliate sales alone.
4) Never knowingly oversell. Your blog is both beautiful and informative. I think you’ve got the balance of information and sales about right. Be careful not to get too sales-orientated. It’s a fine balance and a tough one — keep playing, testing, entertaining and doing what you’re doing and you’ll be fine!
Take care, thanks for your support, and very best of luck.
Nick Cernis’s last blog post: Put Things Off Relaunches With Bigger Kitten!
Hi Jarkko,
Thank you for mentioning my book and for the good words about it.
Also I think this post is a part of a great series of money-making case-study articles. I like it very much and I would like to share some ideas and thoughts that came to me while reading:
* Your store is great, it has cute design and it is very well organized and structured.
* Pay-per-click is a hard-to-win business, especially on the competitive keyword-fields. I think that you have a few points to put the pressure and improve performance:
– Your ads: make them interesting, compelling, inspiring, curious. The headlines have to catch the attention and the body text must have a strong call to action.
– Your bidding strategy: some PPC-masters recommend to make a lot of different ads (even an ad per keyword/key-phrase) and make them ultra-relevant. This will lift your quality score and you will get feedback about the performance of every ad-keyword pair.
– Your landing pages: add more juice in these landing pages. Put testimonials in there. Add some fun. Add a 3D visualization of the books/products – people like to see what they are buying. Try to make several landing pages for each product, rewrite them and make a split testing.
* Do not try to sell your visitors, but do PRE-sell. As an affilaite you are not the seller, you are the referrer. So you are not supposed to sell things, but to review, present and discuss products. Then – refer the visitor to buy the product if he/she is interested of it. If you establish trust and some kind of a relationship with your visitor he/she is going to buy more through your links. (Example: As I am one of your fans, I’ve bought two of the books you present throught your affiliate links. I make these purchases BECAUSE OF YOU, because you recommended these products.)
* Although your store is very nice, I don’t think you even need such kind of site. Just use this blog, prepare separate landing pages and recommend the products in your posts, links, banners… Your loyal visitors will do the rest.
I am sorry for the long comment text if it was boring. These were just my ideas popping-up while I was reading your post.
Good luck!
William
William Profet’s last blog post: The Ultimate Guide to Installing WordPress 2.5
WOW! I am learning a lot from this blog in one day.
Thank @Nick and @William both.
Can all of you give me some suggestions about landing page for online retail store?
I am always wondering how an one page landing page work for retail store, which is selling multiple products. Any suggestion are welcome.
Thanks!
Terence Chang’s last blog post: Entrecard – Should it stay or should it go?
Hi Terence,
I don’t think that a single landing page for a whole retail store will help a lot. Marketing separate products with landing pages is quite different than promoting a whole store. :)
I think you can structure your marketing in three layers here:
1. Promote the store – you can make it through a blog or a complex of marketing strategies. The best case scenario is if you have a content providing website in front and use this site to presell the products of the store.
2. Run the store – make the this store the best store ever – organize products very well, make a good web-site design, put great pictures, make it easy to order and pay.
3. Landing pages for each product – make each product description a mini-landing page: use emotions, testimonials, nice pictures and strong calls to action (buying calls). :)
That’s what I can tell without knowing anything about your store. If you tell me more about your idea I could give you more specific ideas.
Cheers,
William
William Profet’s last blog post: The Ultimate Guide to Installing WordPress 2.5
Amazing stuff, guys! Thanks for all your tips, and the help you are providing! It’s going to take a lot of time for me to digest it all, so forgive me if I’m asking stupid questions ;)
@Terence: Good that you are sharing the information so I know not to go hire marketing companies ;)
I added the all-in-one SEO pack plugin last night and created first versions of the meta tags… But I’m sure I’ll still have to tweak the keywords a lot – and start adding them to my blog as well.
@Nick: I love your idea (2) of adding banner ads at the end of each post. I have been quite afraid of adding ads to my blog so that it wouldn’t feel too much like selling. After all, people don’t come here to buy, but to read my blog posts.
But I’m sure there is still room for more ads on this blog… Or not really ads, but affiliate products that I’m proud to promote, like your book.
And my own product… I’m working on a few projects – and should be able to get the first one out in a short while.
@Others: I’m running out of time now, but I’ll get back to respond to your comments later today. (William, I have lots of questions for you.)
@Jarkko: I’ll be glad to answer all your questions. I hope I will be able to. :-))) So, make your best shot(s). ;-))
I’ve never tackled adwords myself, although I know lots of people have success with it. I prefer to focus on SEO and link building. Thousands of visitors certainly helps as well. :)
Enjoy,
Barbara
Barbara Ling’s last blog post: Make money by stop leaving money on the table
Okay, finally, I’m back to answer the rest of your comments :)
@William: Thanks for the advice, I’ll have to try to improve my landing pages – trying different versions sounds like a good idea! After all, I guess the only way to learn this stuff is by trying tons of different things and then keeping what works.
Then to the question I said I’d have to ask you. In your comment, you wrote: “Do not try to sell your visitors, but do PRE-sell. As an affilaite you are not the seller, you are the referrer.”
I’ve read that from some other sources as well, but still I have a hard time deciding what an affiliate marketer is supposed to be.
In this post, I took the side of thinking of an affiliate as a retailer who describes the product, does his best to explain the benefit and then sells it to the user. That was also some of the idea behind the store.
But then there is the other side, which is that the affiliate is a reviewer of products. And that the blog is the store – as you suggest in your comment.
Do you think that the idea of an affiliate as a retailer makes any sense? If not, what’s the role of separate landing pages and buying ads? After all, the people who come to my landing page from an online ad don’t know me, so how can they buy from me because of me?
And if the landing pages are a part of the blog, what’s the goal of the ads? To get people buy the specific producs, or to get more readers who will, in the end, buy something?
Hi Jarkko, sorry for being late with my answers :((( I am working on more than 10 projects at the moment and this is a little bit overwhelming for me.
You are right, the only bulletproof way is to test, test, test and find what works best for you. It’s the journey, Man! :)
I think that the affiliate marketer have to pre-sell, not to be like a retailer. Why? You have to presell, because:
* If you try to sell (writing sales letters, pushing sales, etc.) when you send your visitor to the merchant’s site, he/she will find another sales efforts and could be bored and pissed of so much selling.
* If you give the customer the information he/she needs to make a purchase-oriented decision – that’s all you need to do. The rest will be done by the merchant’s sales page/site.
* If you do not try to sell to customer he/she will feel you as a friend, a co-buyer who shares his experience with him/her about the product. This creates trust.
But how to presell?
* Write your review for the product – be honest with your opinion (not sales-oriented one, but positive – you want them to buy this product).
* Give tertimonials and ratings.
* Give tables of content.
* Give graphical information – pictures of the product.
* Give them a friendly advices.
* Do not try to get them excited dirtectly but show them your excitement of the product and let them follow you. You want them to desire the product, to think that they “need” it.
* Call for action – gently make them to go to the merchant’s site for “more information” with intention to make them buy the product through your affiliate link.
The affiliate is not a retailer, because
* He does not sell, he just passes customers to the seller.
* He is more like a referrer, a trusted one, than like a retailer.
* The affiliate is like a consultant whom visitor could trust. If he/she feels that you trying to sell him/her something the trust is going to dissapear.
* You are right – part of the work of an affiliate is to be a reviewer of the product. But the blog is not the store, it is the “consulting center”, the “review point” from which pre-selled visitors are boing referred to the seller’s site.
So, I think that an affiliate who tries to be a retailer (which is – in fact – being a seller) will be less successfull than an affiliate who tries to be a trusted consultant.
Landing pages
Landing pages are your presell tool. They should inform the visitor, create trust in you and help him/her to make the RIGHT decision – to go to merchant’s site ana make the purchase. :-). Also landing pages are used as entry points for your PPC campaigns. This is the way to be more relevant and get targeted traffic.
Yes, you are right that people who don’t know you are not going to buy because of you. They will buy because of the relevant information you present to them on the landing page. I have bought “because of you” because I am one of the readers of your blog. But this is a different source of buying visitors than these that come from PPC campaigns.
The Ads
Concerning ads. I hate ads (I have two of them at my sidebar, though :)), most users hate them and do not trust them. Some researches show that visitors don’t even see the banner ads – this is known as “banner blindness”. The more efficient way to direct visitors to some decisions is to advice them, inform them and give them links to click! :) Do you know the saying “Banners are ignored, links are clicked”?
—
I hope I gave you good and helpful answers. If I can help you with more information and co-operation, just drop me an e-mail and I will try to write my best. :-)
Note: These comments are representing just my opinion on the topic. I do not claim that they are the only truth. But from my experience and knowledge, I think that this is the better way to successful affiliate marketing.
William Profet’s last blog post: The Ultimate Guide to Installing WordPress 2.5
Dear jarkko, I am not adwords user yet but I wonder do you know the percentage of google adwords user compare to traditional advertiser (non-adwords advertiser)?. Thanks in advance.
e2’s last blog post: I will Read You