Re: CPM Pricing Models

From: Brad Jensen <brad_at_elstore.com>
Date: Mon 21 Jan 2002 14:01:53 -0500

"Daniel Limbach" <dan_at_attritiongame.com> wrote:

> As a publisher myself, I've decided to deal more in
> reality than many people in this discussion. Many
> Internet publishers want to make something be a
> certain way, even when it isn't the case in reality.
> We're debating amongst ourselves, while the advertisers
> vote with their checkbooks. It's rather silly, because
> the clients aren't even reading this newsletter. We're
> a support group for understanding the new nature of
> online advertising from the publishers' perspective.

Bravo!!!!

> My point was, if someone has 1,000,000 impressions to
> sell, they should be able to make money from their
> sites without relying heavily on advertising. Choose
> high-margin products that deliver good conversions,
> and stop trying to sell ads at $.25 CPM. It can be
> through an affiliate program, or your own products,
> usually an ebook, software, or similar high-margin item.
>
> Given the tables recently published in this digest, one
> million impressions could result in 10,000 clickthroughs
> at a 1% CTR (more if the ad is compelling). Given a 1%
> conversion rate from there (or more if the site can sell
> well), that's 100 sales. If you have a $50 product that
> results in $30 net profit, that's $3,000 every time you
> serve up one million sales. If you are good enough to
> increase the numbers to a 2% CTR and a 2% conversion
> rate, you quadruple your earnings! Do this with 3 or 4
> products, and you've got a very nice revenue stream.
> You'll have to rotate new products now and then, but
> there are lots of things out there to sell with zero
> development costs.

And the secret is the same secret as in mail order - your
back end will make you your profit. Once someone has bought
one thing from you, they are x percent likely to buy a
second (you keep them on an optin list, or have a support
list for the product you sell them where you advertise/
announce new things) then they are y percent likely to buy
a second, z percent likely to buy a third.

If your profit amounts on your three products are a,b,c,
and your profit amount on your original sale is p, then
the value of getting the customer in the first place is

p+a*x+b*y*x+c*x*y*z
for example

p=$10 profit on first sales
a= $20 profit on product a
b=$30 profit on product b
c=$40 profit on product c

x=.30 percentage of original customers who buy product a
y=.40 percentage of buyers of product a who buy product b
z=.50 percentage of buyers of product b who buy product c

$10+ $6 +3.60 + $2.40 = $22

(hope I did that right, I did it in my head)

Even if you make NO money on the first sale, you still make $12
profit.

And the best thing a high content site can sell, is some part of
its own content.

 One thing by the way is elearning, see www.eufrates.com for an
inexpensive way to generate it.

A simple thing is ebooks.

You have the prospect, he is happy and thinks you are great. Sell
him something he likes - you.

It doesn't have to be a hard sell.

Brad Jensen
www.eufrates.com







Received on Mon Jan 21 2002 - 13:01:53 CST