The scenario above is played out over and over as multitudes of businesses hit the web in search of the cyber-world's version of EL Dorado, that mythical city where all is gold. It's not going to happen without careful planning and spending money on marketing and advertising.

The Scarcity of Online Marketing Professionals

How many successful "brick and mortar" businesses have been started without a business plan? I would say very few. Time and time again, I receive calls from businesses wanting to market their web site. My first question is always "Do you have an online marketing plan and budget?" I've never heard "yes we do".

The problem with creating an online marketing plan and budget is the lack of expertise in the Internet medium. The Internet exploded so fast that even educational institutions are struggling to create curriculums that teach Internet marketing and advertising strategies. There is a major shortage of Internet Marketing professionals who have experience. In most cases, traditional marketing professionals have been sacrificed by their companies and thrown into the Internet arena with no experience. The question then becomes "When are they going to fail?" and not "what if they fail?".

Let's assume you do have an online marketing/advertising plan and budget in place. What is the next step? I highly recommend that if you do not have an experienced Internet marketing professional on your roster, consider outsourcing a company with a proven track record. You may want to hire a management team to handle all of your online needs, at the very least hire a seasoned Internet consultant to train your staff. Or, you can always try to muddle through the experience on your own.

A Tale of…Whoa! : Throwing Ad Dollars Down The Drain

I recently had a client who contracted my company, E-Base Interactive, to handle all of their online marketing and advertising responsibilities. What had happened was the "usual". They had started a new dot.com company, were heavily backed by VC, and had now spent an ungodly amount on Internet advertising, with very little results.

The company had signed a multi-million dollar, 1-year contract, with a well-known portal site catering to women. The breakdown was paying $50 CPM (Cost Per Thousand impressions) of their banner ads and includes a co-branded web page. This relates to paying $0.05 each time their banner is displayed, not even clicked on, just being viewed!

I performed a web site traffic and cost analysis for them that still has me cringing. The company was receiving only a 0.43% CTR (Click Through Rate= total banner impressions/web users). The harsh reality is the average CPC (Cost Per Click=$spent/users) is $11.62! I broke their analysis down even further to determine the CPL (Cost Per Lead=$spent/leads). The company is receiving a 1.80% lead ratio to web site visitors, which equates to costing $648.15 per lead generated.

Company's One-Week Analysis:

868,520 impressions X $0.05 ea. (@ $50 CPM) = $43,426
3734 web visitors (868,520 X 0.43% CTR)
$11.62 CPC ($43,426/3734)
67 leads for the week (filled out online form or called the office)
Lead Ratio = 1.80% (67/3734)
$648.15 CPL ($43,426/67)

As I stated, the company signed a 1-year contract and still has 4 months left to go at the time of this writing.

A Tale of…Whew! : Smart Ad Spending Via Pay-for-Performance

As you saw in "The Tale of Whoa!" above, the company is in a losing situation. I immediately created a new long-term marketing plan and advertising strategy for them. Knowing that they did not want to go down another dismal path, just throwing their money away, I started an affiliate program for them.

An Affiliate Program allows an advertiser to only pay for performance. Basically, affiliates (web site owners or companies) will advertise in return for monetary compensation based on their performance. The compensation for performance can be CPC, CPL or CPS (Cost per Sale). It was determined that the company wanted to drive as much traffic to the web site as possible, with the goal of reaching 200,000 unique users per month within 6 months of starting the affiliate program. We met that goal within 3 months. The affiliates are paid $0.10 per click and the affiliate network provider earns $0.02 per click, bringing the total to $0.12 per click. This is a far cry from paying $11.62 per click as shown above.

Here is what happened in the fourth week after starting the affiliate program:

177 Active Affiliates (web sites displaying the companies' banner ads and text links)
314,408 ad impressions ($0.00 CPM)
9406 web site visitors
2.99% CTR (9406/314,408)
CPC= $0.12
Total Cost: $1128.72
109 leads (1.16% Lead Ratio)
CPL=$10.35 ($1128.72/109)

At the time of this writing the company now has several thousand affiliates and is receiving around 90,000 web site visitors per week.

Online Success Can Be Achieved

Since the start of the World Wide Web, we've heard how cost-effective online marketing can be. And though this is true, there has to be an effective management team in place and a solid plan of action. Online success can be achieved with careful preparation and due diligence. Make the most of your advertising dollars, do some research, attend a seminar, hire the right professionals or outsource an experienced management firm. There are several paths leading to the Cyber EL Dorado. Which one are you on?