So, Can You Make Money?

Many readers, after thinking about the last few pages, are probably now in shock, especially if they’ve run a few numbers through their heads. They remember that
■ A click costs at least 5 or 10 cents through the major PPC systems, and often much more.
■ Conversion rates are often 1:100 or 1:200.
How on earth can I possibly make money with PPC? The simple answer is, in many cases,
you can’t. Here’s an example. Let’s say your product will give you a gross profit of $10, before
paying for the PPC costs. Not an unusual sum—many products are in this ballpark, such as
books, music, small gifts, and so on. Let’s give you a fighting chance, and assume you’ll have
a conversion ratio of 1:50. And we’ll assume that you can buy clicks for 10 cents:
■ 50 clicks are needed for one sale.
■ 50 clicks cost $5 (50 × 10 cents).
■ Thus one sale costs $5, so your ROI is $1 for every $1 spent on advertising ($10 preadvertising
profit = $5 profit after advertising; $5/$5 = $1).
You’re making money, but unless you sell a lot of whatever this is, you’re not getting rich.
So let’s see what happens when you change just one thing in the calculation. Let’s try separately
altering the conversion ratio, the click cost, and the gross profit per sale and see how each affects
the equation.
■ Your conversion ratio is 1:100—you just broke even.
■ Your conversion ratio is 1:200—you just lost $10.
■ Your click cost is actually 30 cents a click—you just lost $5.
■ Your click cost is actually 50 cents a click—you just lost $15.
■ Your gross profit is actually $6—you just made $1.
The fact is, PPC doesn’t work for everyone! In particular, you’ll have trouble making PPC
work if:
■ Your products have low gross profits.
■ Your web site has a low conversion ratio.
■ Click costs are very high for the keywords you want to use.
Remember:
■ High Gross Profits + High Conversion Ratios + Low Click Costs = Good!
■ Low Gross Profits + Low Conversions Ratios + High Click Costs = Bad!
Any one of these elements can cause a problem. If all three are bad, you’re in real trouble!