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August 8th, 2008, 10:36 AM #1
Understand Banners & Such.
- Join Date
- June 22nd, 2008
The biggest problems with banners are they almost all vacuum like the proverbial black hole. By that I mean, the click thru rates are dreck or even worse. Merchants and Affiliates NEED to test the CTR of the banners they are using, if they want to make any real money.
In the banner world, a ONE PERCENT click thru difference matters BIG TIME.
And that is for CPC or CPA or for SALES. And believe it or not, for the merchant and the affiliate, the best of all worlds is a CPM banner with a great CTR.
Here's a real example for CPC paid to affiliate.
100,000 Banner spins - pays out 3 cents per click to affiliate. Costs the affiliate $1/CPM. ($100). How many clicks does it take for the affiliate to make a profit? Answer 3,334. In percentage of spins that 3.334%. So the merchant gets 3,334 visitors the $100 he pays to the affiliate.
For the merchant, if he makes more than $100 in sales from 3,334 visitors he makes a profit. If he converts at 1%, he makes 33 Sales. Cost per sale: $3.01
Now suppose the CTR goes to 5%. The merchant will get 5,000 visitors and be out $150. And the affiliate will make a $50 profit. If merchants converts at 1% he makes 50 sales. Cost per sale: $3.00 per sale.
On the affiliate side, the higher the CTR/CPM the more they make in CPC.
Now if you figure it on ROI from a CPA or Sales Model. The numbers are exactly the same, but they are reversed. Now, the conversion rate applies to the affiliate profits. In EVERY case, someone is paying the exact same cost per click to breakeven and make a profit.
Quality of traffic is important, but so is the branding effect of the banners.
If you look at Google Adwords Ads as simply a 'type of banner,' it amounts to the same thing. In this case Google is the affiliate being paid per click. And in that model, they want the BEST CTR they can muster which is why you get a higher quality score if your CTR is better than the other guys.
Here's a real life instance: I have a merchant that pays me 3 cents per click thru by contract with a $30K monthly cap. They had a banner which generated 5.6% CTR, so on 1 million banner spins, I get 56,000 clicks and made $1680. Then they came up with a new banner that generates a 9.7% CTR. Awesome. I now get 97,000 clicks for the same number of spins. The income went to $2910. So to earn the whole $30K, I need to just buy more spins. Since I was paying $1/CPM. I got a $1230 raise just for changing the banner.
The same idea works for CPA ... At $1/CPM, ONE MILLION banner spins costs $1,000. You get 5% click thru rate, you get 5,000 potential sales visiting your page or offer. That counts out at $.20 per click. If you pay $3/CPM for the same 5,000 visitors, it costs you $.60/click. At $5.00 CPM, it's $1/click.
So on the advertising side what matters most is BANNER CLICK THRU RATE.
On the sales side what matters most is CONVERSION PER VISITOR.
And no matter how you slice and dice it, it all ends up at the same place. CPM to brand and get visitors, conversions to determine profitablity.
So, I would suggest that before ANYONE tries to increase the quality of their traffic, they try to increase the quality of the CTR on their banners and the conversions per hundreds on their site. A 1% boost in CTR from your links, is the quickest way to get more traffic across the board.
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