For this week’s Internet Marketing post I decided to answer the question of one of our blog readers, Tauya from LocalAfro. Here is Tauya’s question:

Hello,

First of all, thank you very much for all your helpful and informative blog posts.

I am a CEO of LocalAfro Ltd, a start-up from the UK, yet to launch. LocalAfro Ltd was established with the primary goal of commissioning and maintaining a vertical search social website (think Yelp + Facebook+Eventful mashup). It’s target market is the African-Caribbean community in the UK. This demography is estimated to be 1.8million people as of 2007, with a growth rate of about 53% between 1991 and 2001. Ok, enough of statistics.

We are in the middle of drawing up a detailed business and marketing plan, and we thought you will be of help to us. We were wondering if you could write up a blog post detailing Cash flow projections for a “advert driven business”, as well a marketing plan. I have done some extensive research on this, running several unique Google queries, but most business and marketing plan samples are for product selling businesses.

Your post could include basic calculations as well, on things like pay per click, page impressions, what  the value of say 5000 unique users/unique impressions is in money. What are the best ways to maximize revenue, advert placement etc.

I hope we are not asking for much. I look forward reading new posts on you blog, it is very informative.

Thank you

Tauya

Great questions Tauya! Here are my thoughts:

5,000 visitors are worth vastly different amounts of money depending on what niche you’re targeting. If you’re targeting Arizona DUI Lawyer (5 Sure-fire Ways To Know If Your Business Will Work Or Not) then it could be worth a lot of money. If you’re targeting a niche that doesn’t pay very much then your 5,000 visitors are practically worthless.

Here is how I would break down your revenue projection:

Visitors: 5,000
Estimated Click Through Rate: 1% (this would require a prominent ad placement above the fold)
–> # of clicks: 50

How much is a click worth?

According to Google’s Keyword Tool, here are a few examples based on what Tauya gave me:

• Social website: $2.17 / click
• African-Caribbean community: $0.08 / click
• Afro: $0.69 / click
• United Kingdom: $2.33 / click
• Facebook: $0.95 / click

As you can see there is a wide range of click prices. If your content focused on “social website” and “United Kingdom” the cost per click would be over $2.00. But if you target the “African-Caribbean community” or “Afro” then the price drops off dramatically. For sake of an example let’s assume the $2.17 / click price for “social website” which will be at the high end of your spectrum. If you’re using AdSense, Google will now take 30-50% of that as commission for lining up the sale. Assuming they only take 30% then you’re left with 70% of $2.17 which is $1.52. I would note that these estimates are very very high – in reality you’ll likely be seeing 10% of that figure. But let’s say you did make $1.52 per click. Now with the 50 clicks that we’re getting that would mean we’ve made $76 from our 5,000 visitors. Under this very optimistic scenario you’ll need to get 660 clicks to earn $1,000. With the 1% click through rate that we assumed, that means you’ll need to drive 66,000 visitors to your site to make $1,000.

It can be tough to make a living online!  Other factors to keep in mind are that ad rates are falling due to the economic recession and that social media sites tend to have very very low click through rates (way below 1%) because many people return to the site, know where the ads are, and don’t click on them. It’s called “ad blindness” and if they’re not clicking on your ads then you’re not making money. I hope this helps in building your business case! Good luck!

Evan Carmichael