How Best to Monetize From the Internet

15 Dec

The Internet has turned out to be an awesomely cost-effective (and no, that doesnt mean cheap. It means just that – Cost effective) medium of promoting oneself. Compared to other channels available, the Internet is far more measurable, controllable and reportable!

I am not a big fan of print because it also serves as a lead generation medium, but with little success nowadays given the clutter. And there is nothing in the name of innovation that happens in that space. Its run by people whose philosophy is “less is money. Control space”. And its not measurable. I know of cases where education institutions have run quarter page ads in 5 national dailies, only to generate 33 leads! No accountability!

Radio suffers from the same. I think its high time that Radio innovated and went social. Ads are rarely effective on radio (and OMG, whats up with the real estate ads on radio. WHO MAKES THEM?) and the medium will do far better if they start promoting business through conversations and the audience, than through these stupid ads.

And TV doesnt make sense for 99% of businesses!

Problem is, while most people know that the Internet is important, most people dont understand it. So here are the top 5 things that you should know, if you wish to Monetize from the Internet.

Lets assume that your main aim is Lead Generation for your business. And lets assume you are an MBA institute looking for students aspiring for an MBA degree.

You have broadly 4 options to generate those leads:

1. Search Engine Marketing (Google Adwords, Yahoo etc)

2. Social Media Marketing (Facebook, Orkut etc)

3. Vertical Marketing (Sites working in the MBA or education space such as PagalGuy, StudyNation etc)

4. Associated Marketing (Sites that might have your target audience such as Naukri, Linkedin etc)

Within these options, you have the following 3 types of advertising you can undertake

1. Text Ads

2. Banner Ads

3. Emailers

Lesson 1: Understanding Search Engine Marketing (or CPC Based Models)

It all boils down to the math and the metric of Cost Per Lead. How much do you pay to acquire a qualified lead (which in this is a student aiming for an MBA degree in this academic session)

The process:

1. You pick keywords to target (I wish this was as simple to execute as it was to write it)

2. Yours ads show whenever people search for the particular keywords

3. If someone clicks on the ad, it takes them to something called a Landing Page (LP) and you pay Google a Cost-per-Click (CPC)

4. The LP will have details about the business and a lead form that the user will fill. However, not everyone who lands on the LP will fill the form and there will be a conversion (C)

So CPL = CPC / C (in %)

That is, if CPC = INR 10 and C = 5%, then CPL = 10/5% = INR 200

This works not just for SEM, but any advertising platform that allows you to run CPC based advertising. Could be banners on vertical or associated sites etc

2. Understanding Banner Advertising (or CPM based models)

Most websites still continue to charge on an CPM (Cost per thousand impressions – M is roman numeral for 1000, and no CPT wasnt cool enough!) basis. Which means that for every 1000 times the ad is viewed (could be by the same users, so not to be confused with unique impressions), the advertisers pays an amount. This amount varies from INR 75-150 based on the audience you are targeting.

While most banners are meant for branding more than lead generation, if you really had to calculate the performance of a banner from a lead generation perspective, you would need a metric called Click-Through-Rate (CTR). Which is the % of people clicking the banner for every 100 impressions. The CTR is dependent on multiple aspects such as the banner copy, the banner position etc and varies from as low as 0.01% to as high as 1-2%

So CPL = (CPM/1000)/(CTR x C)

So, if CPM = 100, CTR = 0.5% and C = 5%, then you are getting 5 clicks per 1000 impressions (1000 x 0.5%) and those give you 0.25 leads (5 clicks x 5% LP Conversion). At a cost of INR 100 (CPM). So your CPL = (100/1000)/(0.5% x 5%) = INR 400

Do note that CTR as a concept applies to even text ads and not just banner. So the same math can be applied to SEM as well. However, since we already have CPC based pricing there, this is not needed.

3. Understanding Emailer Marketing

Emailers are not the neatest way to build leads, but still work because of their seemingly low price points. Emailers usually cost INR 0.5-2.0 per email (lets call it EP) depending on the quality of the data. The metric here to measure CPL is something called Open Rate (OR), which measures how many emails are actually opened (in %). Usual open rates are between 2-10%. rarely higher!

Once opened, there will be an ad copy that will prompt the user to click (CTR) and then land on your LP which will again have a conversion (C). So the math is obvious

CPL = EP / (OR x CTR x C)

So, if your EP is INR 1/email, OR is 5%, CTR is 10% and C is 5%, then you have CPL = 1/(5%x10%x5%) = INR 4,000! So an emailer at a seemingly low cost of INR 1 results in CPL of 4,000!! Didnt seem like it in the beginning, right?

4. Understanding Lead Purchasing

A lot of businesses are now also buying leads rather than generating them on their own. And websites such as JustDial are helping them. If you are an MBA institute, you can go to StudyNation or Shiksha and buy leads. You usually pay a lumpsum amount for a duration and get leads per day. Its easy to calculate the CPL in such cases and it will turn out to be much lower (mostly) than the above methods. For the simple reason that these leads are not exclusive.

All the leads generated above were exclusive to the MBA institute. In the sense that they were generated only by you. That doesnt mean that the lead is only with you, because the same student might have gone and filled up his details somewhere else too!

So if you accept the fact that exclusivity on the Internet is an oxymoron, then it might make sense to buy leads and convert them. The advantage is that you get leads much cheaper and in bigger volumes (ask businesses that advertise with JustDial and pay as low as INR 15 per lead and still make a lot of money!!)

5. Understanding Final Conversions

Ultimately, leads are generated to generate business. So all businesses should be tracking a Cost Per Conversion. Which is simply your total cost (of lead generation) divided by the total conversions you got!

This should ideally be done for each source of lead generation, so thats its easy to identify what is working and what is not. Also, the way you convert will also be different for different sources. An exclusive lead will be tackled differently from a shared lead, which is being chased by several other businesses too!

The above simple rules apply to all media. Be it social or search or content networks. What differs is how you go about them.

6 Responses to How Best to Monetize From the Internet



December 18th, 2010 at 4:17 pm

working on a story and other stuff… saw a blog from u.. was interested in talking about it
please mail me


Abhishek Mathur

December 23rd, 2010 at 9:54 pm

Would be good to see metrics to track Social Media as well.


Udit Khanna

December 24th, 2010 at 4:48 am

Nice post. However I’d like to mention that I have achieved a lot of success with email marketing as an advertising option. The only difference may be that the stage at which it is done is different.

It is probably the best way to engage a client who has expressed an interest in the kind of services you offer. So if you have generated some opt ins or have got relevant data, emails can be a great conversion tool.

For businesses which sell stuff it’s a great way to communicate special offers and deals, and probably the cheapest one too.



December 24th, 2010 at 9:53 am

@Abhishek: Surely. A later post

@Udit: Thanks. I guess I was driven more by my (not so good) experiences of email marketing. But glad you could bring in a different perspective



December 25th, 2010 at 5:01 am

Ankur, saw your previous post about your friend trying to sell bags from China. Well what if we reverse the approach. Instead of picking on a business based on cheap sourcing from China, we source only that which is cheaply promotable on the web.
I sat in office one day looking at every item around me and started googling it. There are plenty which I found which have minimal competition and reasonable search volumes. I would assume I could optimize them for the primary keyword in a months time. If somebody is keen to start a business involving the Internet, I think this simple approach may work.
What are your views on this?



December 25th, 2010 at 10:11 am

@Udit: Good idea. The only cavest I would add to your thought is that make sure the items have margin to play with. So what you are looking for are items that have high search volume and margins, but (surprisingly) low competition.

You will see that most of these items fall under categories of lifestyle, kids segment, outdoors etc.

Its surely something that you should explore. My prediction is that unlike the west, India will have more of vertical ecommerce ventures that have depth. So pick your niche and be the best one in that!

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