Making money online - it's a numbers game

It took me a while to understand this, but making money online is a numbers game. Why did it take me so long to understand this? I was being either dense or hopeful, take your pick.

It turns out that earning online is not that different to earning off-line - the principles of starting a small business still apply. You still need to put in the hours, you still need to track statistics, you still have to learn by trial and error what works and what doesn't and you still have to cope with setbacks and roll with the changing economy and the even faster changing internet.

What do I mean by "numbers"? Read on to find out!

A simple metric to allow you to calculate what you need to do to earn online

When people think of earning online, they think of running a "flagship blog" or site that they set up and then just leave, so it earns them money "while they sleep". When this dream doesn't materialise, they give up. But why did they fail? Traffic problems. The numbers of visitors coming to their site was not sufficient.

Whether you are earning with affiliate marketing or monetizing your site with Adsense, traffic matters. For the purposes of this page I'll be talking about Adsense, but the metrics apply to any form of eCommerce.

Conservatively, of the traffic you get, about 0.75% - 2% will click on ads. Occasionally it's higher, and if you've picked a poor niche it will be lower. The clicks you get on Adsense will vary from about 50 cents a click to about $2 a click (though it can be both higher or lower than this). For the purposes of this example, I'll assume a 1% clickthrough rate (CTR) and a payment-per-click of $1.

The metric is as follows:

visitors x CTR x payment-per-click = money earned.

Therefore to earn $1000 a month with a 1% CTR and $1 a click, you will need 100,000 visitors a month. 100,000! That's incredible. How many single blogs or websites get that kind of traffic? Very few. Of course your blog or site could be the exceptional one that really makes it. But what is the probability of that? Very low indeed.

However, you could get a total of 100,000 visitors a month if you had 100 sites which got 1000 visitors a month each, or if you had 200 sites which got 500 visitors a month each, or if you had 500 sites that got 200 visitors each. It should be a cinch to set up a blog that gets 1000 visitors a month, or a hubpage that gets 200 visitors a month. Then you simply repeat the process and add more blogs or hubpages till you get the requisite number, and bingo, you are there!

The more sites you have the easier it is to hit your financial goals, as you will increase the total numbers of visitors you get each month.

The second way to improve the amount earned is to improve the payment-per-click. This involves carefully picking keywords using Google's Adwords tool. The Adwords tool is geared towards advertisers - note that as a publisher you will only get about 20% of the cost-per-click quoted in the tool. The aim here is to pick keywords that will pay you more than $1 a click. The drawback is that every other internet marketer in the world has had the same idea - so that even if you have picked the right keyword, you will face fierce competition getting your site high enough in the search results so that you get traffic to it (though it is doable if you are prepared to put in the graft of building backlinks).

Choosing the correct keyword can improve your chances of earning online

The final method of increasing the amount you earn is to improve the CTR. With some subjects, the clickthrough rate is very very poor - politics, humour and celebrity stuff comes to mind. The people who read that type of material are doing so just to while away their lunch hour, or because they are skiving at work. Of course they won't click ads - since when does reading about Obama prompt someone to buy something? The CTR varies from niche to niche, and the only way to find out which niches have the best CTR is through trial and error.

Choosing the correct niche can improve your CTR

Of the above methods of improving your online income, making more sites is the easiest. The other two require a lot more skill and effort. Of course, while you are making a lot of sites, you can also take the opportunity to experiment with niches to see which pay more per click, and which niches have a high CTR. Experiment with at least 10-15 niches. It's not a waste of time - you just never know what might work. Also bear in mind that both the economy and the internet continue to evolve, so what might be a good niche one year might not be the next. Internet Marketers who have concentrated on just one niche have seen their income plummet when the value of their keyword suddenly goes down because economic conditions have changed. Just as in bricks-and-mortar businesses, there is no such thing as setting something up and then forgetting it. It's a continuous race.

Putting it into practice

I've shown you the theory above, but putting it into practice is not quite so simple. You have to account for duds. In every business there are duds - the product you thought was brilliant that no one wants to buy, the rental property that should bring in a good income but doesn't because it's been empty for two months in the year, the websites that you thought would be lucrative but which haven't produced a cent.

I currently have 61 sites across Hubpages, Infobarrel and Squidoo, and of these only 34 have made me some money. In other words I have a 56% success rate. Part of the problem is that I haven't been able to get traffic to some of the sites - so I'm going to have to work on backlink building to solve that. And of the 34 sites that have made money, it's ranged from a site earning a grand total of 5 cents earned to sites earning really decent money.

So you can see straight away that the formula needs to be adjusted.

The importance of keeping statistics

Which brings me straight to the importance of tracking whether your sites are successes or failures.

No business would run successfuly without the management knowing exactly which products were doing well, what the profit margins were, which lines were a dead loss and so on. Yet many people who work online attempt to make money without keeping track of what they are doing. Instead they jump from one guru to another, with the latest thing they've read being their guiding point. However, you already have all the information you need to guide your online business from the work you've already done - you just haven't tracked it.

If you haven't got Excel, download OpenOffice, which is free. The spreadsheet package is called OpenOffice Calc.

Keep a master spreadsheet for your online business. Organise it by niche, with one sheet in the spreadsheet per niche. For each niche, list the sites you've created on that subject, the amount of money you make from each site each month, the traffic, average payment-per-click and the CTR. As you build sites you should start to get an idea of which niches are profitable and which are not.

It's imperative you do this exercise for your current hubs and websites before you go any further. It will take a few hours to collate, (if you have set up URL channels in your Adsense account, it should be easy to get your hands on the data per URL), but at the end of it you should have some invaluable information.

The real reason it's important to keep stats is so you can pinpoint where the problems are. You should be able to tell at a glance whether the issue is the niche you've picked or whether you've got the right niche and simply haven't got sufficient traffic to it. Once you have nailed down the problem, you can start to solve it - eg building backlinks to the hubs with no traffic, or building more hubs in profitable niches.

You should try to get at least 200 visitors to each site per month, and you should aim for a CTR of at least 1%.

It's also worth calculating what your overall current CTR and payment-per-click is, and see how many hubs you will need to create to make $1000 per month if you just kept on as you are. The shock of it certainly motivated me to change my strategy.

Conclusion

The easiest way to make money online is to increase the number of sites, pages or hubs you have. Volume works. Larger websites work better than websites with only a few pages. Add in picking the right niches and keywords, and you improve your chances again. Build backlinks to the most profitable hubs to drive traffic to them, and you improve your chances further.

If you are starting out, choose about 10 niches to write about, create about two hubs per niche, assess which niches are the most profitable, and then add new hubs to the most lucrative niches. But note this is an ongoing process - the internet is evolving at warp speed, no-one knows what is going to happen next and remember that economic developments will also affect what is profitable at any given time.

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