Christian Little

Today’s topic is a concept that 99% of aspiring webmasters overlook completely, even when they start becoming very successful with their websites – but this is an extremely important concept for you to consider.

Determining the value of your visitors is really quite simple and uses a very basic math formula:

Revenue / Visitors = Revenue per Visitor

So let’s take one of my client sites as an example. According to Site Catalyst, they have had 3,500 unique visitors hit their site in the past 48 hours. Additionally, they have had $20,000 in revenue come in.

Applying the formula: 20000 / 3500 = $5.71 per visitor

That’s actually extremely high for most websites, but that’s what you get when you operate in a very specific niche market like they do.

So why does this metric matter?

Well simply put, if you know how much a unique visitor is worth to you, then your goal is to spend less than that amount trying to get them to your website.

A few examples:

Pay-Per-Click Advertising – my client needs to spend less than $5.71/click on their PPC campaigns. So I went looking at their campaigns this morning, and it turns out they are only spending about $2.50/click on their Google Adwords campaign – perfect!

Banner Advertising – the law of averages is that 1% of your impressions will result in a click on a banner (but several variables come into play here such as placement, banner content, etc). So let’s say somebody is offering us a deal for 100,000 banner impressions on a very related website for $1000. Is it worth it to us? With the law of averages, we know that we will get about 10 clicks for every 1000 impressions, so 100k impressions will get us about 100 clicks (approximate of course). We also know that 100 clicks is worth 100*5.71 = $571 in potential revenue to us – which means the campaign will be a loss for us ($1000 – $571 = $429 lost). So we probably wouldn’t accept the deal.

Those are just two examples of how this could really affect your marketing budget. But what if you sell traffic on your website?

Let’s say your website generates 10,000 unique visitors per month (a nice round number). Until now, you have been selling just simple text links for $10/month, and you have a block of 6 spots in total that you always fill. With no other revenue sources, you know that your site makes about $60 / 10,000 = $0.006 per visitor – that’s horrible!

So the first task here would be to raise that to something more suitable. Let’s aim for $0.10/visitor as your goal (if you get to that point and keep your current traffic volume, then you will clear $1000/month instead of $60!). So you start offering banner advertising and other forms of advertising to raise the income of your site. Supposed you do that and get advertisers jumping at the gun and you are now making $1000 per month in advertising and text links on your site.

One key lesson you need to learn here is that when you make a change like this to your website, you have to let the advertising sit for a few weeks (even a month or two) so your visitors can adjust to the sudden influx of ads. After some time has past, then look at adding more advertising space on your site, or maybe look at buying traffic to your site to make banner advertising more valuable.

And that takes you to the first part of this post – as you can see, this will get you into a buy/sell cycle that you have to constantly monitor. But once you’ve got the basic skills down, you will be amazed at how easily you can take a website from nothing to something huge in no time at all.

Cheers!

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