What are your visitors worth to you?

Once you know how to calculate the value of a visitor to your site, you'll be able to figure out how much you can afford to spend on advertising without draining your wallet.

There are a few simple calculations you'll need to make in order to determine the value of your visitors. In order to make these calculations, you'll need to know your total number of sales, gross revenues, total expenses, and unique visitors for a set period of time (let's say a month). Once you have these figures at your disposal, you're ready to do some math!

Step 1: Calculate the conversion rate of your site

Your conversion rate is calculated by dividing the number of unique visitors to your site by the total number of sales you made in a given time period. Here's the equation:

Unique Visitors / 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 total visitors / 40 sales = conversion rate of 125 unique visitors per sale

If you don't know how many unique visitors your site gets, contact your Web server 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

In order to determine the true value of a visitor, you'll need to know what your "take-home" profits are for each sale, after all your expenses have been subtracted. Here's the equation:

(Gross Revenue - Total Expenses) / Total Number of Sales = Net Profit per Sale

If you sold 40 items for $79.95 each last month: 40 sales x $79.95 per item = $3,198 gross revenues

From your total gross revenues, you'd then subtract your monthly expenses. If your total expenses came to $1,566, your net profit would be: $3,198 gross revenues - $1,566 expenses = $1,632 net profit

Next, 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: $1,632 net profit / 40 sales = $40.80 net profit per sale

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 have calculated your sales conversion rate and net profit, here's how you calculate the value of a visitor:

Net Profit per Sale / 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 / 125 conversion rate = $0.32

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 them needs to buy your product. 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!

Create a stampede of traffic to your site with our top 4 "smart advertising" techniques

People are often reluctant to put a lot of money into online advertising because they're not confident their investments will pay off. The truth is, well-planned paid advertising strategies can RAPIDLY increase the number of visitors to your site -- and put you on the fast track to success!

The trick is knowing which strategies to invest in. We've tried a lot of different forms of advertising over the years, and the four listed below are by far the most profitable. We strongly suggest you give them a try before exploring any other types of advertising out there.

1. Get your site listed on the major pay-per-click search engines

Without a doubt, pay-per-click (PPC) search engines are still the best value for your advertising dollar!

If you want to get listed on a PPC search engine, bid on keywords that relate to the content of your site. If you're the highest bidder on a given keyword, your site will be the first listing that appears at the top of the "results" page when someone performs a search for that keyword.

And getting listed on a PPC search engine is the easiest way to get listed at the top of the major search engines -- fast! Plus, when you're in the top three listings on Overture (the industry leader in PPC search), your site will be featured as a "sponsored listing" on highly trafficked sites such as Yahoo!, Altavista, CNN.com, InfoSpace, and MSN.com.

If you monitor the click-through and sales conversion rates of the keywords you're bidding on, there's no way you can lose money. Just be sure to keep your bids lower than your visitor worth, and you'll be set!

You may also want to check out the following PPC search

engines:

- http://www.overture.com

- https://adwords.google.com/select/

- http://www.findwhat.com

2. Place text ads in popular e-zines and online trade journals

E-zines are popping up everywhere on the 'Net these days, all catering to very different niche markets. And just like offline magazines, a lot of them need to sell advertising in order to stay profitable.

By placing an ad in these publications, you can increase your site's exposure and "piggyback" on the e-zine's reputation, encouraging readers to click on the ad and check out your site. But first, you'll have to do some research to discover which e-zines and online trade journals are popular with your niche market.

Try to place your ads in well trafficked e-zines with content that's directly relevant to your target audience. For example, if you sell bulk recycled stationery, advertise in an e-zine geared to office workers -- not in one that's meant for rock climbers!

The cost of running an e-zine ad can vary anywhere from $20 to $100 per ad, depending on the e-zine and the type of ads they publish. It's generally safe to assume that more popular e-zines charge more for their ads.

To learn more about which e-zines are going to be the best places for you to advertise, here are a few sites to check out:

www.EzineAdAuction.com

www.FreezineWeb.com

www.BestEzines.com

3. Get your site listed on paid inclusion directories and portals

A great way to get your site seen by a lot of different people -- AND boost your ranking with the free search engines! -- is to buy a listing on paid directories or portal sites.

A directory is an indexed listing of sites that's managed by human editors (as opposed to the free search engines, which are entirely run by computers). Some directories are free, while others charge anywhere from $10 to $100 for a listing. Do some research to discover which directories are popular with your niche market before deciding where you want your site to be listed.

Portals are "megasites" that provide a wide range of resources, information, and services to their visitors. Yahoo! started off as a directory but has grown to become a popular portal site that offers search capability, news, entertainment, and other features in addition to its indexed listings.

Yahoo! gets a lot of traffic, but it can also be very expensive! It costs $299 to get your site fast-tracked and reviewed for inclusion by Yahoo!'s human editors, and even then your site isn't guaranteed to be included.

If you want to get a good listing on the Yahoo! directory, you should probably focus your advertising efforts on Overture, Yahoo!'s pay-per-click search engine, which can get you listed on Yahoo! for just pennies a click.

4. Post a banner, classified ad, or pop-up on industry "hot sites"

Whenever you come across sites that are popular with your niche market, do whatever you can to get your site listed on them.

If they sell classified ads on their site, buy one!

You can also pay these industry "hot sites" to place a banner ad or pop-up on their site.

Banner ads have declined somewhat in popularity, but that's mostly due to people using them poorly in the past. Skyscrapers (vertical ads placed at the edge of a web page) and discreet banners that look like they're part of the web page can still be very effective.

Pop-ups have gotten a poor reputation, but again, that's due to people using them in intrusive or offensive ways, such as pop-up "loops" that take over your computer. We've found that a tasteful pop-up presenting people with a valuable offer, such as a free subscription to a newsletter or a coupon, can still generate a high click-through rate -- especially when it's placed on a page with relevant content.

Of course, pop-up blockers are becoming more common, and that can be a problem. But there are new technogies available that allow you to create ads that look like pop-ups, even though they're actually built into the HTML coding of the web page itself. We use Hover Ad Creator -- and when we switched over to using it, we saw a 162% boost in our sales -- in less than 24 hours!

Final thoughts

When you're exploring your advertising options, you may be tempted by "short-cut" strategies offered by companies that are often more interested in your money than in helping you get the word out about your site. These sites typically offer so-called "targeted traffic" or "targeted e-mail lists" for sale, and will try to convince you that they're offering quality traffic. More often than not however, they can provide only general traffic -- people who have no particular interest in your product or service.

The best way to discover which paid advertising techniques work best for your company is to test, test, and test again. There's going to be some trial and error involved. You may lose a little money on the "errors" -- but once you discover the techniques that lure scores of visitors to your site, you'll find that all your testing was worth it.