Netvestor: Economical principles behind three different methods of conversion

Sunday, December 9, 2007

Economical principles behind three different methods of conversion

Conversion is somewhat a hard word, but it describes process of "converting" your website's visitors into profit. If 1000 visitors comes to your site and 100 of them make you money, you have converted 10% of your visitors into money (or you have conversion rate of 10%). So with that cleared up you need to know what methods of conversion you can apply.

There are three basic ways of visitor conversion:

  1. Sell your own product
  2. Sell someone's product
  3. Sell information about someone's product

Sell your own product

This is the best method of conversion. Reason for this is that your commission is 100%. You earn what you sell. While the best, it is also used by least number of people. Why is that?

People tend to think that they have nothing valuable to sell. They think of products in a too material way. But services are also a product and many have a unique skill or knowledge that can be monetized. You can also buy something at lower price and sell it at higher. Be creative.

Here are some examples for selling an own product
  • Sell domain names - find an attractive domain name and grab it before someone else does. Build a domain name portfolio
  • Write an ebook - If you have writing skills you can turn one of your passions into an ebook and sell it for value
  • Design themes and templates - Nowadays custom themes and templates are very popular. Create an original theme and sell it in webmaster forums
  • Create software and games - If you have programming skills you can write small useful applications and promote them. Fun addicting games can monetize very well too
  • Offer translation services - If you speak fluently several languages you can offer translation services
  • Sell anything you can make - This can be stickers, t-shirts, carved sculptures, earrings.

Sell someones' product

This is also called affiliating. Basically you sign up with one of the affiliate marketing programs, pick up links and banners and put them on your site. Whenever someone buys something through your link, you get a commission. Affiliate marketing commissions are in range of 3%-8% but we can say that is is around 10% for sake of comparison. That means that affiliate marketing is 10 times worse solution then selling your own product where you receive 100% commission. Most popular affiliate programs are CJ, Clickbank, Shareasale, Amazon, Ebay...

Sell information about someone's product

This is also called advertising. What you do is put advertisements on your site that take your visitors to another site, for various purposes. The most popular advertising program is Google's Adsense. Earnings through advertisements vary but are in the range of 1% commission for what you could be getting if you were selling target advertised product. This means advertisements are 10 times worser then affiliate marketing and 100 times worser then selling your own product, commission vise. Getting there?

So what's best for me?

Most beginners start with advertisements because that's easiest to setup. But if a click through an advertisement yields $1, similar affiliate marketing link could yield $10 while if you were directly selling the target product you can cash in $100. These are only rough numbers but show where the smart money is.

If you are beginner you can start with ads. If you already have ads you should consider upgrading to affiliate links. If you are already in affiliate marketing you should consider selling your products or services directly.

Another hint. It is equally difficult to sell a sticker and a diamond ring. On average every 200 users that come to your site looking for sticker or diamond ring will buy one. But your earnings on a diamond ring will be 1,000 times bigger then for the sticker. Think about that too.

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