Online Advertising Analysis Tools

While most pay-per-click advertisers understand the essentials about driving qualified visitors to their site, most come up short of their profit goals. To drive large amounts of qualified traffic that actually converts from popular ad networks, review the following information and analytical equations provided to understand and maximize your promotional return on investment.

Know how much you can afford to spend on
each new visitor to your site.

Understanding the value of visitors enables you to figure out how much you can afford to spend on advertising without draining your budget. There are a few simple calculations you will need to determine the value of your visitors. To make these calculations, you will need to know your total number of sales, gross revenues, total expenses and total number of unique visitors for a set period of time, such as one month. Once you have these figures at your disposal, you are ready to do some math.

Step 1. Calculate the conversion rate of your site.
You can calculate your conversion rate by dividing the total number of unique visitors to your site by the total number of sales you made in a given time period. Here is the equation:

Unique Visitors divided by Total Number of Sales = Conversion Rate

For example, if your site got 5,000 unique visitors last month and you made 40 sales, then your equation would be 5,000 visitors divided by 40 sales, which equals a conversion rate of 125 unique visitors per sale.

If you do not know how many unique visitors your site gets, contact your Web host and ask to see your server logs. Your logs contain a lot of data about your traffic and are a goldmine of information.

Step 2. Calculate the net profits for every sale you make.
To determine the true value of a visitor to your site, you will need to know what your "take home" profits are for each sale after all of your expenses have been subtracted. Here is the equation:

[Gross Revenue - Total Expenses] divided by Total Number of Sales = Net Profit per Sale

Let's say you sold 40 items for $79.95 each last month. You would then calculate 40 sales multiplied by $79.95 per item, which equals $3,198 in gross revenues.

From your total gross revenues, you would then subtract your monthly expenses. If your total expenses came to $1,566, your net profit would be $3,198 in gross revenues minus $1,566 in expenses for a total net profit of $1,632.

Next, you will need to divide your total net profit by your total number of sales to calculate your net profit per sale. For example, if you made 40 sales, you would divide $1,632 in net profits by 40 sales to get $40.80 in net profits per sale. Now you've realized that for every $79.95 item you sell, $40.80 goes straight into your pocket as pure profit!

Step 3. Calculate your visitor worth by dividing your net profit per sale by your conversion rate. Now that you've calculated your sales conversion rate and net profit, here's how you calculate the value of a visitor:

Net Profit per Sale divided by Conversion Rate = Visitor Worth

If your net profit per sale is $40.80 and your conversion rate is 1 in 125, then your equation will look like this: $40.80 net profit per sale divided by a 125 conversion rate, which equals $0.32 visitor value.

This means you can afford to spend up to $0.32 to attract a single visitor to your site. So if you invest $50 in testing an advertising technique, it should bring you at least 156 visitors to break even—and one of those visitors needs to make a purchase. If you receive fewer visitors than this and no one makes a purchase, then your test has failed, and you'll need to move on to the next test.

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