Burning money

How to Lose Money on Ads

In 2016, I was trying to promote an ebook about photography. I wrote an email course on photography tricks. Then I started a Bing Ads campaign to drive traffic to my sign up page.

The plan

My calculations looked like this:

Cost per click
I set my maximum cost per click at $0.05.

Cost per subscriber
I estimated that 1 in 10 clicks would result in a sign up. Therefore, my cost per subscriber would be $0.50.

$0.05 per click
× 10 clicks to get a subscriber
= $0.50 per subscriber

Cost to generate a sale
I estimated that 1 in 30 subscribers would buy the ebook. Therefore, it would cost $15 to generate a sale.

$0.50 per subscriber
× 30 subscribers to generate a sale
= $15.00 to generate a sale

Profit
For each sale of the ebook, I would get $21. Therefore, I would make about $6 profit per sale.

$21 revenue per sale
− $15 to generate a sale
= $6 profit

Putting It All Together

Clicks: 1,000
Average Cost per Click: $0.05
Total Ad Spend: $0.05 per click × 1,000 clicks = $50 ad spend
Subscribers: 1,000 clicks ÷ 10 clicks for a subscriber = 100 subscribers
Sales: 100 subscribers ÷ 30 subscribers for a sale = 3 sales
Revenue: 3 sales × $21 per sale = $63 revenue
Bottom Line: $63 revenue − $50 ad spend = $13 profit

The Outcome

This is what actually happened:

Clicks: 488
Average Cost per Click: $0.03
Total Ad Spend: $16.61
Subscribers: 1
Sales: 0
Revenue: $0
Bottom Line: $0 revenue − $16.61 ad spend = $16.61 loss

Where did I go wrong? In many places…

Mistake 1: Ad Network

Mistake
When I started using paid ads, I chose Google Search. The cost per click on Google Search is relatively high. I was spending about $0.50 per click.

So I decided to try the Google Display Network instead. I was getting clicks for as low as $0.03. The traffic from the Google Display Network isn’t as good. Your ad isn’t displayed to people searching for information. Instead, your ad is annoying them while they use an app. Still, I felt that I could make it work. I could get about 500 clicks for $15(these would be clicks from rich countries too). Surely, that would be enough to generate a sale? Unfortunately, no. I wasn’t able to generate sales. The problem wasn’t the network, it was my keyword strategy(which I cover later).

At the time, I blamed my ad placements. When app developers put Google Display Ads in their apps, they just want clicks. It doesn’t matter if the user clicked by accident, the developers still get paid. My ads were being shown in apps:

Ad placements

I wanted my ads to be shown to desktop users only. This would reduce the likelihood of accidental clicks. As well as this, it takes extra effort to fill out credit card information on a phone. I figured desktop users would be more likely to make a purchase.

In 2016, Google didn’t allow you to show to your ads to desktop users only. You could set a lower bid for smartphones. But you couldn’t set a lower bid for tablets. Unlike Google, Bing allowed you to set a lower bid for both smartphones and tablets. Furthermore, if I used Bing Ads, my ads would be shown to people searching for information. Bing Ads can also be much cheaper than Google Search ads. So I chose Bing Ads.

Lesson
Bing has less users than Google. You can get a better price per click, but you don’t get nearly as many clicks. I got impatient. I wanted lots of traffic immediately. So I was not careful enough when choosing keywords…

Mistake 2: Keywords

Mistake
I wanted to make money from blogging as soon as possible. This lead me to cut corners. I chose keywords with:

1. A lot of traffic
2. A low cost per click

117 of my clicks were for the keyword “la”. I wonder how many of these clicks were because the person’s finger slipped. You might be tempted to say: “Well, duh! Of course that keyword didn’t work!”. First – you’re mean. Second – have a look at my ad:

Trick photo ad

I was really specific. I thought only people interested in photography would click on this ad.

Lesson
All good things come to those who wait. If I had to do this again, I would set up campaigns with just one keyword. I would choose the keyword on the basis of relevance, not traffic. I wouldn’t even go with a keyword like “photography” or even “trick photography”. Who might search for “trick photography”?

  • People writing essays about photography
  • People thinking about taking up photography
  • People learning English

I only want to bring in people who:

  • Own a camera
  • Take their photography seriously
  • Buy photography books

So I would pick keywords like “how to clean camera lens”. My cost per click might be higher, but I could still make a profit. I would probably get more subscribers and sales per click.

The keyword “cleaning camera lens” gets 2 clicks per month on Bing. So I would probably use Google Ads – “camera lens cleaner” gets 1,600 searches per month on Google. I would have to run lots of experiments simultaneously. Getting results could take months of work – but they’d probably look a lot better.

Mistake 3: Location

Mistake
I was a little more careful with my choice of location. I used a metric called the inequality-adjusted human development index(IHDI). Countries with a high IHDI score have rich citizens:

IHDI countries

My ad campaign targeted countries at the top of this list. I was ruling out countries where people are less likely to have money for ebooks: India, Pakistan, and so on. This was a step in the right direction, but I didn’t go far enough. I thought “all rich countries are equal”.

Lesson
Again, I should have had more patience. I wanted quick results. More countries means more clicks per day. I should have picked just one country per campaign. Australian photographers might learn by going to photography meetups. Norwegian photographers may learn by reading – because it’s cold outside. It may make sense to narrow it down further. Every country has rich areas and poor areas.

Mistake 4: Blaming the product

Mistake
When I got the results of the campaign, I misinterpreted them. I decided that the product was the problem. I thought “nobody wants to learn about photography, I’ll sell something else”. This, in my opinion, was my worst mistake. I had evidence to the contrary and ignored it. The ebook is sold through ClickBank, an affiliate marketplace. Here’s the product listing:

Clickbank Listing

At the bottom of the listing, you can see it says “Grav: 6.69”. This refers to ClickBank Gravity – a measure of a product’s popularity. If that number is above 0, then people are buying that product.

Lesson
Starting to see a pattern here? I was in too much of a rush. I should have accepted a painful reality. Switching to a new product wouldn’t help. I needed to take my time and slowly refine my sales process.

Mistake 5: Product choice

Mistake
I had read the ebook and really liked it. Even so, I shouldn’t have tried to promote it. I’m interested in photography, but I’m no expert. It took me a long time to write photography content. I had to read and learn as I went.

Lesson
I should have chosen a subject that I know really well… like blogging. I think I know what I’m talking about, but what do you think? Leave a comment and let me know.

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