The Bigger Picture - Free Vs. Paid Advertising

At the risk of sounding sensational, if you understand the concepts introduced in this article it could literally mean the difference between miserable failure and insane online profits for your business. I'm not talking about a magical formula that will guarantee success, but it's something that all online marketers need to understand.

Unfortunately, most do not - and therefore they spend every waking minute just trying to stay in business. And within a year, most small businesses give up any hope of making it big online - firmly believing that "this Internet thing just doesn't work."

Well I'm here to tell you that it does. In fact, the Internet is the best thing that has ever happened to the home-based or small business owner wanting to reach a global market. As with anything else in life, it's actually pretty easy to profit online if you know how.

When it comes to making lots of money, all that really matters is marketing. This is easily proven by the fact that you don't need a better product or a lower price to make more money than your competition. The truth is that you can literally make millions selling mediocre products - if you know how to market them effectively.

Of course, you should always strive to deliver quality products and great value to your customers - but the point is that marketing is all that really matters. It's what you need to be spending 90% or more of your time doing if you have any hopes of developing a profitable online business. Doing paperwork, building web sites, answering email, and processing orders doesn't help grow your business - only advertising does.

Advertising is the lifeblood of any business. If you do not learn how to advertise your products and services both efficiently and effectively, you won't be in business long. While the Internet has lessened or eliminated many of the costs normally associated with starting and running a small business, and it's now easier than ever, you'll never realize significant profits if you don't grow your business through effective marketing.

There are really just two kinds of advertising - that which you pay for and that which you get for free. And both should have their place in your overall marketing strategy. The problem arises when one does not understand how or when to use each.

Everywhere we look it seems that someone is claiming you can get rich online by taking advantage of the free advertising the Internet offers.

While it's a true statement, the misleading part is that it's almost always followed by something like, "We'll give you a list of over 984324984 places to advertise for free!" They normally go on to explain how anyone can get rich on the Internet because all of the advertising is free, and if you just send them $29.95 ... well you know how it goes.

Unfortunately, as anyone who has tried posting zillions of free ads on the Internet will tell you it just doesn't work that way. What you really need to know about posting free ads online is that for the most part it's a waste of time - unless you're targeting other marketers - because an overwhelming majority of people who visit free ad sites are other online marketers like you who are trying to promote their own business.

Effective "free advertising" strategies do exist, but they aren't what the average online marketer thinks of when hearing this often hyped-up phrase. In future issues we'll discuss things like networking, swapping links, joint-ventures, press releases, and the other "free advertising" strategies that you will want to pursue.

But back to the story at hand - free versus paid advertising.

Are you ready for the one concept that separates the men from the boys, so to speak, online? Here it is:

Paid advertising is the laziest way to promote your site!

You don't really think that Yahoo became the most popular web site on the Internet, getting millions of visitors per day, by using free advertising strategies do you? Heck no. Among other things, they spend millions of dollars per year on things like buying advertising on other big sites and advertising on both radio and television.

Now before you say you don't have millions per year to spend on advertising, allow me to show you how you can apply these concepts to your business on a smaller scale. The good news is that if you use the right approach you can start with a few dollars. It doesn't really matter what you're marketing, but let's assume that you sell widgets at your web site. How could you utilize paid advertising profitably?

Now before I scare you off with the thought of having to spend lots and lots of money on advertising, there's something that you need to realize. And it's a basic concept you should be able to immediately agree with:

If you spend $50 on advertising and it generates more than $50 in net profits, that's a good investment.

Simple right? Well, through the use of proper testing and a "scientific" approach to advertising, there's no reason you can't turn your original $50 ad into millions of dollars in profits. It's just a matter of developing a system that creates a profit, and then reinvesting your initial profits back into your business in order to further expand your advertising.

Remember the widgets? Assume that through proper tracking of your web you're able to determine that 1 out of every 100 visitors to your site buys a widget. Let's also assume that on the sale of every widget you make a $50 profit. Do you see that any ad you buy which delivers more than 100 visitors to your site per $50 spent is a profitable investment?

Promoting a site should be approached with this type of a scientific or mathematical attitude. Any advertising you do is either profitable or not, and you need to know which it is so you don't waste time and money.

Here's a somewhat simplistic strategy that you could use to get started:

1. Use a combination of free or low-cost strategies to promote your web site, generating initial traffic which will serve as a starting point.

2. Through proper tracking of your site, determine the exact "value" of a visitor in terms of dollars and sense. This is absolutely critical.

3. Utilize paid advertising that proves to be profitable according to step 2, based on the value of a visitor and the number of visitors generated.

4. Through ongoing testing, tracking, and tweaking, try to increase the value of a web site visitor as well as response to your advertising.

5. Repeat steps 2-4 as necessary - or forever.

The power of this scientific or mathematical approach to web site promotion is that once you have completed the steps you will have an almost automated advertising campaign that can literally send you all the traffic you need. Rather than spending hours and hours each day promoting your site, you simply buy more advertising.

The bottom line is that there are only 24 hours in a day and there's only so much you can do during that time. Free advertising strategies can be effective, but normally, anything that's "free" is going to "cost" you time.

On the other hand, if you could spend $1,000 a day on advertising to make $1,000 a day in profits -- without spending hours doing it -- why wouldn't you just do that? It's not hard at all. Consider GoTo.com for example, where you can buy click-thrus for as little as 1-25 cents.

That fits the formula quite nicely. GoTo alone won't send you enough traffic to make you rich, but it's a good example of effectively promoting your site without spending much time doing it. There are lots of others.

Give this 5-step scientific approach a try. If you find you just can't seem to make the formula work, there can only be a few reasons for it - either you're not advertising in the right places, your web site isn't doing its job, your profit margins are too low, or your product or service itself is the problem. Figure out which it is and you can't fail.

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Originally published in IMC's Internet Marketing Chronicles.
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