Diversifying from AdSense – Build a Sales Force, check out CPA.

12 Feb
2007

You can ask the savvy website operator about what would be their biggest nightmare, and the usual replies will be along the lines of: “server crash”,”hack attack”,”Google bans me”,”get sued”, and so forth.

Yet none of the above matter if you are not making a cent.

A great majority of advertising-supported websites (especially ‘web 2.0′ sites) rely on AdSense. If they were to ever construct a P&L statement, the entire revenue segment would consist of AdSense revenue. The entire strategy is to pin a leaderboard + rectangle + one more spot on the site, remove borders, blend into the site, and voila – revenue is had. Some pin their hopes on a ‘premium’ bringing in money, but most over-estimate the number of people that will actually subscribe.

This is somewhere between high dangerous and insane. Having all your eggs in one basket is never a good idea.

Jason Calacanis was a smart man when it came to his Weblogs Inc network. He immediately knew that to make any real money, he had to build out a sales force. So while he trumpeted the fact that AdSense was making them over $1,000,000 a year he also noted that AdSense was secondary:

AdSense doesn’t reach the level of display advertising ($3-12 CPM) and it never will…

If a sales team (or even person) is still a bit of a stretch, it is prudent for you to look into affiliate sales. You have to consider what CPC is – the advertiser is spending time and money in bidding on a keyword. So the profit per click must be significant enough to warrant the price being paid per click (basically the ROI has to be worth it). In the case of CPA, the time advertiser spends much less time on the sale. So the profit per sale can be less (as the advertiser has less time to expense on each sale). Furthermore, the upsell in CPC is far more difficult than in affiliate sales. Lastly, in any market, there is always more than one advertiser (metaphorically – a basket). If one causes trouble, you can always go to the next.

If the above paragraph is confusing – read it again. And again. CPA margins are higher, ‘selling’ on CPA is easier, and you have more than one basket – always a good thing.

We do (and are in the process of doing) what I have said above. I would say more than 50% of our revenue is CPA based. What is fantastic is for the same niche, Google CPC is roughly 15 cents. With CPA, it is roughly 43 cents. And click rates are higher. Our CPA CPM is roughly 4.5x more than Google CPC. In fact, we even have some pure CPA sites (no banner/rectangle/skyscraper/etc ads) that have tremendous CPMs.

AdSense is a good place to start, but it should not be your only (or even primary) source of revenue. To build a strong advertising-based business, one must fully look into assembling a sales team and the CPA model. Not doing so is being negligent to your business.

5 Responses to Diversifying from AdSense – Build a Sales Force, check out CPA.

Avatar

Nabil

February 13th, 2007 at 9:57 am

As an example, could you be kind to provide a CPA dependant website of yours?

I do know and most of us do acknowledge that CPA is way better than Adsense. But I think for most websites which have just started out or have just started-up, have problems in depending on CPA.

What I’d suggest is that web 2.0 companies should start-off using Adsense for the first few months of operation while building it’s traffic and authority in a particular niche that it’s serving. Then it should think about diversifying it’s revenue stream by offering low CPA rates for it’s probable advertisers as a start or even offer free advertising for a minimum contract period i.e. pay a low CPA rate for two months and get one month free – therefore the advertiser gets a 2+1 months advertising package.

Then the company could introduce subscription services for it’s services. This way the web 2.0 is really diversifying it’s revenue stream and building a hopefully more profitable company rather than just depending on Adsense.

The main problem that web 2.0 companies face when appointing affiliate ad sales team is the company’s own authority is not yet known, and the ad-sales team might not try hard enough to sell your ad inventory until the company builds repotoire. That’s why many go to Adsense. The fact that there will be advertisers on their screens in a matter of minutes and as soon as traffic builds up there is high hopes of high click throughs is appealing to most.

So what are your thoughts Ahmed?

Avatar

Ahmed

February 13th, 2007 at 11:14 am

Well Nabil – I prefer not to link directly to sites that use affiliate programs just because I’m a paranoid nutcase ;)

I can cite an example from a genre I used to previously deal with – MMOs. Eg World of Warcraft – our earnings were roughly 6x CPC. All we did was swap out Google AdSense and recommend people purchase gold so that they can enjoy more of the game faster.

Basically you take topic X, what would interest people interested in topic X, and sell based on that. For a sports blog – sell tickets. Webmaster site – referrals work great.

It does take time and effort, but it is well worth it.

Avatar

Nabil

February 13th, 2007 at 12:12 pm

Ahmed, I have to agree with you on that!

Selling through affiliate links is the way to go. It’s immediate as long as they approve your publisher account.

Well I don’t know but here’s a thought.. most web 2.0 companies are service oriented and aren’t in relation with any or most products sold through affiliate links. Take for example Digg.com, it doesn’t have any reason to sell products or put up product links on it’s site, although my personal opinion is that they will do well putting up tech related products because they handle large amounts of traffic and have strong supporters, but otherwise it won’t cut it for them.

Another example would be file hosting companies, or real estate listing aggregators etc. these really won’t have the ability to use affiliate links.

But yes, its true that these companies should rely on other sources of income apart from Adsense like i’ve said previously. So it’s all about marketing tactics I guess.

Avatar

Ahmed

February 14th, 2007 at 11:07 am

Digg gets a *ton* of traffic from Google. I remember reading (I believe from Hitwise) that 40% of their traffic is from Google.

So that traffic can be sold to. I’m sure you have seen Chitika – why not try doing such a well to such visitors? Leave up CPM ads for ‘normal users’, and throw out the CPA ads for SE-referred people.

I would never trust a file hosting company that offers everything free, and a real estate listing aggregator can make a killing by reaching deals with the people they are aggregating – realtors.

Eg – we own a domain/site on a very popular tourist destination site for country X. Instead of popping up Google AdSense ads (it has a lot of advertisers) we reached a deal with a travel agent. Did it require some effort? Yep. But the end result was a fantastic CPM. We get good money, the travel agent gets targetted leads – it is in everyone’s interest.

Avatar

Speedlinking - Reader Edition 17 February 2007

February 18th, 2007 at 5:19 am

[...] Diversifying from AdSense – Build a Sales Force, check out CPA [...]

top