Many new bloggers have been inspired by the stories of John Chow or Darren Rowse and how they’ve made thousands of dollars on the internet, just by blogging from the comforts of the world. Inspired enough to start their own blogs to see if they can replicate the kinds of successes they know in their hearts they can achieve. Well, if you ask a majority of them - “what do you know about running an online business?” - I would bet a majority of them would just give you a blank look. So, this post is for the beginners who are starting to build their business foundation.
I’m not going to talk about what you should write about or what advertisers you will probably want to go after. I’m just going to talk about the basic formulas and numbers you will need to know if you’re making money or just wasting your time chasing a dream! I also will try and help you measure how well you are doing by giving you some markers to aim for.
Theses are the metrics that measure the basic raw numbers you will have to know about your site to help you really gain a better perspective on how achievable your goals will be.
- Total Revenue Generated - This is the total amount of money generated from all your revenue sources (Adsense, Adbrite, Amazon Associates, eBay Auction Affiliates, etc.)
- Total Costs - This is all the money you spent on advertising for your website.
- Total Visitors - The Number of People who actually visited your blog
- Total Page Views aka Impressions - The Number of Pages viewed by your visitors
Next, we will look at simple formulas you can use to measure the success of your site. Try and do this on a monthly basis so that you should have enough traffic and revenue to truly gauge the financial health of your site.
Total Revenue / Total Visitors = A
Total Costs / Total Visitors = B
then
Gross Margin = (A - B) / A
- If your Gross Margin is 0% or below, that means there’s a lot of changes that need to be made to your site, since you’re either breaking even or losing money on your investments.
- If your Gross Margin is between 0-30%, you probably need to do just a little bit of tweaking, since 0-30% means you’re making Zero to $0.30 for every dollar you spend.
- If you’re Gross Margin is more than 30%, you’ve done a good job placing your advertisements in the right spots, so just ramp up the traffic.
It doesn’t get anymore basic than this and yes - you can apply this formula of Gross Margin to other aspects of your business to help you make the right decision 99% of the time. Unfortunately, I will have to cover that in another post as there are many more metrics to consider dependent of what you would like to measure.
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Wow this is a similar article that I have read recently.
Much better written from Mr. Gary Lee.
I guess you have to include the opportunity cost for the valuable time spent on blogging. Not only the net value obtained must be positive, it must be considerably More valued than what you are doing elsewhere, or any other alternatives.
how do i know i’m lame? i had a conversation with sam on saturday night at 3am pretty much going over the SAME information. jeez, stop me gare, please!
good post