2017-03-29T17:21:58+00:00 April 19th, 2013/Traffic Sources/By /

Traffic Sources: How to Master and Dominate Traffic Sources Pt. 3

bid

Part 1 – Introduction
Part 2 – The Different Traffic Sources
Part 3 – The Bidding Process

Introductions are out the way and it’s time to dig into the good stuff.

I’ve tried to make the concepts as simple as possible, but it may still be confusing if you’ve never run paid traffic before. Take some action and re-read the posts later once you have some experience. I’m here to teach how to dominate paid traffic, not how to make $10 a day with adsense blogs.

Bids

Every network has their own algorithm for how they deliver traffic. The right bid price so that you’re profitable, getting the high quality traffic, and still getting volume. Bid too low and you won’t get any volume. Bid too high and it eats into your profit margins. It’s a balancing act.

The Relationship Between Bids, Click-through Rate, & Volume

Lets do some simple math to understand how some places work. Remember there are 1000+ places to buy traffic from and each one does things a little different; I’m trying to show you the fundamentals of how it should work.

eCPM

The ad world is rule by a metric called eCPM which stands for “effective cost per thousand impressions.” It’s a fancy way of saying how much the website makes for every 1000 times the ad is shown.

eCPM = (Total Earnings / Impressions ) * 1000

Imagine a real world scenario.

You have a small blog about how to make money online. It gets about 30,000 views a month (impressions). An advertiser offers to pay you $500 for a square ad on your size bar.

eCPM = ($500 total earnings / 30,000 impressions) *1000 = $16.67

Larger traffic sources and websites work off of an auction model which maximizes their eCPM. 

There’s typically 3 ways to buy traffic: CPM vs. CPC vs Flat Rate.

CPM

Some places that work off a CPM model include media buying & a lot of adult-oriented traffic sources,

When we bid on a CPM basis, it means we’re paying for 1,000 impressions. With CPM, we take all the risk. What does that mean? It means if I pay for 10,000 impressions and no one clicks the ads, I still have to pay for it.

That’s why with CPM it’s important that you have ads with a very high click-through rate.

How do traffic sources allocate their volume? Whichever advertisers they can make the most money from. It’s pretty simple, usually whoever bids the most will get the most traffic.

Mr A bids .45cpm
Mr B bids .35cpm
Mr C bids .65cpm

Mr C will get most of your traffic because he’s bidding the most. If you’re selling a car, you’re going to sell it to the highest bidder right?

One X factor is some places will give you a “bonus” for a higher daily budget.

Mr A bids .45cpm and has a budget of $3,000
Mr B bids .40cpm and has a budget of $5,000

Even though Mr A has a higher bid, Mr B might get more traffic because he’s more valuable to them with his higher spend limit.

To get more traffic with a CPM bidding model, just increase your bids and up that daily spend limit.

Cost Per Click Bidding 

Things are a little more complicated with CPC bidding because they factor in your click-through rate in their formula.

It’s not as simple as whoever bids the most, gets the most traffic. Lets illustrate with some simple math. Imagine 3 advertisers are competing for the same placement.

Mr A is bidding $0.75 a click. His ad is shown 140000 times, but it only clicked by people 600 times. His click-through rate (CTR %) is .43. The website earnings is $450 from Mr A. 

Mr A eCPM = ( $450 / 130000) / *1000 =  $3.21

Mr B is bidding $0.50 a click. His ad is shown 100000 times, but it is clicked 700 times. His click-through rate (CTR %) is .7%. The website earnings is $350 from Mr B.

Mr B eCPM = ($350 / 100000) *1000 = $3.50

Mr C is bidding $0.45 a click. His ad is shown 100000 times, but it is clicked 900 times. His click-through rate (CTR%) is .9%. The website earnings is $405 from Mr C.

Mr C eCPM = ($405 / 100000) *1000 = $4.05

What’s the point of all the numbers and nerdy formulas?

You can see that Mr C was actually bidding the lowest, but because of his amazing click-through rate, the website actually makes the most money from him (he has the highest eCPM). They are going to give him more traffic even though the other guys are bidding more.

On a CPC bidding model, the high bids doesn’t matter if not many people are clicking the ads.

As a reward for his high CTR, the traffic source will give him a discount. Even Mr C though he’s paying .45 now, he might be able to lower his bids to $.37 cpc and still get traffic. This is their incentive for Mr C to keep split testing and aiming for a higher click-through rate. Everyone wins because more people click the ads and Mr C gets cheaper clicks.

This is a major part of dominating a traffic source. Learn how to be a better create better ads and get high click-through rates.

Flat Rate

Flat rate just means you buy all the impressions at a set rate. Website A has 10,000,000 impressions a month. You do a small test and see that it’s profitable. You could buy out the website or a certain placement for the entire week or month. When you do this, you can get a big discount.

There was one traffic placement that was insanely profitable for me a while back. How did I dominate? I bought every single ad on there by pre-paying for it a few months in advance.

If you’re using Traffic Source A and you see that a certain website is very profitable, is there a way to cut the middle man and go direct? You can get a significant discount.

Of course there are risks. One is you’re wiring a significant amount of cash. Another is what if your offer goes down or gets capped? Make sure you have backups ready. Also it’s always good to start small and build your way up.

Bidding Strategies

For bidding strategies it’s all about experimentation. There are no golden rules; what works at one place could be the exact opposite strategy at another.

  • Bid low first,  then raise your bids
  • Bid high first, then lower your bids
  • Bid exactly what their suggested bid is
  • How fast do you adjust bids?
  • Different traffic sources calculate your new bids at different times.
  • Bidding Cost Per Click vs CPM.
  • Run of network traffic vs direct placements
  • Some places give you a bonus if you have a high campaign limit. (Warning: Be careful. If you are going to create a super high spending limit on your account, watch it closely and make sure everything backs out).
  • Some places give you a bonus if you have a lot of $ in your prepaid balance.
  • Sometimes bidding higher can be more profitable because you get access to better placements. Think about it, it’s classic supply & demand.

Start small. Become profitable first before you try to get more traffic. Don’t set a higher spend limit than what you can afford.

Test. Experiment.

Going to War

I love this shit.

This is where you and another guy are the #1 and #2 guys and you’re fighting for the top spot.

My best advice is to really focus on increasing your profit margins. Higher CTR ads, better landing page, better offer, higher payout on the offer, better lead quality, etc. The higher your profit margin, the higher you can afford to bid.

There’s also some more advanced concepts to bidding like game theory. Lets say I am #2 with a $.35CPM bid. The top guy is at #1 with a $.40 CPM. If I try to outbid him with $.43, he might outbid me again to $.45. The higher the bid goes, we both lose. 

Another concept is what I call reverse engineering. I can see his landing pages, offers, get an idea of his payouts, ads, etc. and roughly calculate his profit margins. I can get an idea if my margins are higher than his and bid accordingly.

Also a lot of other strategies, but I’m going to keep those to myself.

Conclusion

Pick a traffic source and try to figure out what their algorithm is for the bidding process and find the sweet spot. Do you want massive volume or would you rather have a lower volume but more profitable?

Are there any tricks you can find to get the most traffic with the lowest bids?

This article took a lot of time and experience to write so sharing it is much appreciated.