My AdWords Spending for 2010
This post is a follow up to How Much Money I Made From Side Projects In 2010 from earlier in the week. In that post I talked about how much revenue was generated from one of my side projects. Clearly those numbers are worthless without looking at how much it cost to generate that revenue. Let's take a look at that.
AdWords
Although I tried some other ad platforms as well (mentioned later), I spent the most with the Google AdWords network. In the HN thread for the previous post I estimated $5k. Turns out I was pretty close. Here's a month by month break down.
| Month | Clicks | Impressions | CTR | Avg. CPC | Cost | Cost / conv. | Conv. rate |
|---|---|---|---|---|---|---|---|
| 1/1/2010 | 334 | 21100 | 1.58% | $0.18 | $60.72 | $1.17 | 15.57% |
| 3/1/2010 | 126 | 12289 | 1.03% | $0.18 | $22.60 | $2.26 | 7.94% |
| 4/1/2010 | 428 | 42810 | 1.00% | $0.22 | $93.83 | $1.95 | 11.21% |
| 7/1/2010 | 369 | 22621 | 1.63% | $0.22 | $80.88 | $2.45 | 8.94% |
| 8/1/2010 | 4195 | 158202 | 2.65% | $0.27 | $1,116.61 | $1.99 | 13.37% |
| 9/1/2010 | 5126 | 193727 | 2.65% | $0.28 | $1,444.94 | $2.14 | 13.17% |
| 10/1/2010 | 2494 | 123450 | 2.02% | $0.27 | $671.19 | $2.09 | 12.87% |
| 11/1/2010 | 1166 | 71018 | 1.64% | $0.26 | $304.34 | $1.98 | 13.21% |
| 12/1/2010 | 1154 | 67267 | 1.72% | $0.26 | $298.40 | $1.94 | 13.34% |
| Total | 15876 | 921912 | 1.72% | $0.27 | $4,215.75 | $2.10 | 12.65% |
I was about $800 over on my estimate.
How I Read These Numbers
I'm far from an AdWords expert and I don't pay nearly enough attention to my campaigns as I should. The number I generally look at the most is cost per conversion ("Cost / conv" above).
In 2010 I paid $2.10 for every user that signed up for a free account. Since paid accounts at $20 to be profitable I would need to convert free users to pay users at a rate slightly better then 10% (10.5% to be exact).
Granted some of these users may renew which means in the long term I can afford to do less then 10% and still come out ahead.
Free To Paid
I didn't always, but for at least the last year I started keeping track of how new users came to the site. This allows me to check how well various customer acquisition methods are working at converting to paid accounts.
This is just looking at users that came in from AdWords.
| Month | Signups | Paid | Conversion Rate |
|---|---|---|---|
| 2010-01 | 57 | 11 | 19.3% |
| 2010-03 | 10 | 1 | 10% |
| 2010-04 | 50 | 3 | 6% |
| 2010-07 | 31 | 6 | 19.35% |
| 2010-08 | 561 | 102 | 18.18% |
| 2010-09 | 677 | 119 | 17.58% |
| 2010-10 | 318 | 56 | 17.61% |
| 2010-11 | 150 | 20 | 13.33% |
| 2010-12 | 145 | 13 | 8.97% |
| Total | 1999 | 331 | 16.56% |
What This Means
That I'm an idiot who should be spending more on AdWords.
I spent $4215 and generated revenue of $6620. That's +$2405 (not including PayPal's cut). My free to paid conversion rate is 16.5% - well above the 10% break even point.
Those Who Don't Learn From History...
...something something. Last year I came to the same conclusion. I'm not spending enough on AdWords.
Last year I spent $762 on AdWords and made $1720 for a difference of +$958.
Although I increased my AdWords spending 5.5x my revenue only increased 3.8x. This seems to indicate that my return will diminish as I throw more money at AdWords. There still seems to be room to push it higher though and still do well.
Facebook Ads
I also gave Facebook Ads a try last year. I spent $120 on ads over a 5 day period in September. No one even signed up for a free account. I killed that campaign pretty quickly. I'm not saying Facebooks Ads can't work, but I clearly needed to change my approach. I haven't revisited this, but may at some point.
Coming Up
In my last post I showed that I made $30k in new orders. If only $6600 came from AdWords, where did the other $23.4k come from? I'll take a look at that in an upcoming post so, make sure to sign up for my feed or follow me on twitter.
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