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Steven Aitchison is writing a really great series on his foray into search engine marketing. Click here to read his first post on the subject.

Basically, Steven is detailing the results of his first search engine marketing campaign. In this post, I’m going to talk about his numbers and begin the process of analyzing his campaign. This should be highly informative for anyone considering this type of internet marketing activity.

Steven is pimping products for Amazon, and on his blog, he’s sharing everything except for which products he’s trying to sell and what his keywords are.

Everything else is completely transparent.

If you’ll notice, Steven has spent 102.98 pounds on advertising and has made 69.53 pounds. From reading his blog, I think there’s more money coming in for items that haven’t been shipped yet. But he’s still losing money. He say’s if everything is shipped and paid, he’ll have a loss of about 18 pounds–that’s about $36.19.

Briefly, Steven is using Google Adwords to advertise Amazon products. The landing page is on Amazon, not a website Steven has created. So, the prospective buyer clicks on an ad and is sent directly to a specific page Steven has indicated on Amazon.

Some people make a ton of money doing this.

I’m just now entering the online marketing arena (I’ll tell you how later), but this type of search engine marketing (SEM) is a really simple model to use. Steven chose this because it’s simple, and he didn’t have to create a webpage. If you want an introduction to all of this, take a look at this book, which I’ve read, Affiliate Millions.

I’ve yet to try SEM in this way, although I’m about to start. From what I’ve read on blogs and in books, specifically the above book, losing a little money at first is normal. I think Steven should feel pretty good about where he is on the learning curve.

Let’s take a look at his numbers, so we can understand better what’s going on.

There are some very important metrics one has to follow in these campaigns.

One of these is Click Through Rate (CTR). CTR is the number of clicks you get per the number of impressions. One impression is an actual instance of the showing of the ad. (These type ads show up on the right hand column of most search engines.)

Unfortunately, Steven does not give us the number of impressions, so we can’t calculate his CTR. CTR is important, because ads with better CTR’s can run at higher positions even though the advertiser is not paying as much for the ad as other advertisers below him. More about this later.

Another important metric is Cost Per Click, CPC. If you’ll look at the bottom row of the table, “Totals”, you’ll see that Steven has spent 102.98 pounds for 357 clicks. Now, using a currency converter, here, 102.98 pounds is $207.00. (I think in dollars.) So, Steven’s CPC is $207/357 = $0.58 per click.

The third metric we need to talk about is conversion rate (CR). That’s the number of sales you make per number of clicks. Steven is getting 24 orders (sales) for 357 clicks, that’s a CR of 7%.

From this, you can calculate the amount of money you need to spendto create a sale. If you know how much money you make from a sale, you decide if this is a campaign you want to continue.

What’s cool about internet marketing is it’s very much a numbers game. People call this arbitrage. You pay so much for a sale, and you make so much per sale. If the difference is positive, you should continue doing what you’re doing.

I’ll talk more about this later, especially as Steven, myself, and others I find produce more numbers.

I wanted to introduce this concept to this blog, because as you can read in the previous post, I’ve changed my focus to what I’m calling “The Science of Making Money on the Internet.”

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This entry was posted on Monday, July 2nd, 2007 at 10:24 am and is filed under Online Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.