Hitting Five Hundred

At the start of this month, I passed the five hundred dollar mark for money spent on advertising via Project Wonderful. At this benchmark, here are my experiences from an advertiser's point of view.

Most of the money I spent was to advertise hostingforaquid.co.uk, the business that quietly ticks over and pays most of my bills for me while I work on my more serious projects (namely website design via stainless-design.co.uk, and retro arcade machine rental/sales via an unfinished website that I'm not going to publicise just yet). Stainless Design is what earns my real money, while the arcade machines and hosting just provide a nice residual income stream that doesn't take up too much of my time.

One or two other sites (including this one) had a tenner or two, spent via PW, to start them off. The money from those sites now goes into the pot to advertise HFAQ, and I view them (from a financial perspective, anyway) as ways to reduce my advertising expenditure while still getting a similar amount of advertising done.

A little background on Hosting For A Quid, so the number-crunching that follows will make a little more sense - there are seven different packages, at £1, £3, £4, £6, £8 and £10 per month. That's only six prices - one of the packages has the same data transfer and storage limitations of the £1/month one, but the features of the £10/month one. It costs four quid a month and is the most popular package. Roughly half of the money that comes in each year is made up of monthly subscriptions, and the other half is made up of customers buying a year up-front. I also sell domain names, but the money I make on them is measured in pennies rather than pounds, so practically all of the money comes from the hosting.

Five hundred dollars is, right now, about two hundred and sixty quid. Roughly two months' worth of my typical advertising budget, as it would be spent via Google Adwords - I've been rather conservative with trying out Project Wonderful, and I'm rather conservative with advertising in general. I've spread this out over bids since January, so I'm still spending a little less with PW. I'm continuing to advertise HFAQ via Google AdWords, and I don't think I'll stop using either service any time soon.

The cost per click, as most PWT members will already suspect, has worked out to be a fraction of what Google asks - about one tenth, to be precise (web hosting is a ridiculously competitive market, so the keyword bids are through the roof). The conversion rate for the Project Wonderful campaign, however, is not so promising - only 0.4%, compared with 1.6% through Google (an average over the whole of 2006). Still, given that the cost per visitor is one tenth as much as Google, the conversion rate could drop even further than that and PW would still be performing better pound-for-pound. Reasons for this could include:

* When I advertise via AdWords, people from the UK are already searching for hosting services, so I get them right when they want me to - they have more of a look around the site, and tend to convert better into customers.
* The bulk of traffic coming from PW ads are from overseas, mostly in the USA - at a buck ninety to the pound right now it's hard for me to be terribly competitive in the US, where the webhosting market is even more saturated than it is here in the UK. Upon reaching the final phase of the checkout, PayPal converts the currency into the local amount and awaits the final confirmation that seldom arrives.
* People click the ads on webcomics they like in order to support the creator, regardless of whether they're actually interested in my services - naturally leading to a ridiculously high bounce rate.
* Although fewer visitors actually turn into customers, those that do tend to go for the higher-end packages - combined with PW's low prices, this leads to a higher R.O.I. (incidentally if this data is useful to you, they also tend to go for annual payments, rather than monthly subscriptions)

The bounce rate is also a sight higher on the traffic coming in via PW - an average bounce of 68% from Google, and 81% from Project Wonderful. Four out of five people leave HFAQ immediately after following a Project Wonderful ad to the website. That's pretty atrocious, even considering that a lot of folks are coming in from overseas.

However, even with all those drawbacks, the rock-bottom prices of Project Wonderful still make it a better deal than Google AdWords. For my £260-odd spent, I've got back just over three hundred quid in sales of annual packages, and an extra thirty quid per month from folks on a monthly subscription.

Let's crunch those numbers a bit - my cancellation rate is less than two per cent, but let's be really generous and go for a worst-case scenario where the people who signed up via Project Wonderful have a much higher cancellation rate. Let's make that £30 into £20, and assume that a year from now I'll still be getting £20 a month from the £30/month worth of customers who found me via PW. So, taken from today and even disregarding the fees dating back to January (largely because I can't be arsed to work it out right now), that's £240 in a year. Add the customers who paid for a year up front, and it becomes £540, or about $1,060. A 100% annual return on investment, being conservative - it's almost like swapping dollars for pounds.

Even though Google delivers more accurately-targeted traffic with a far higher conversion rate, it costs so much more that my return on investment in 2006, during which time I used AdWords exclusively, was around 35%.

The immediate picture is that Project Wonderful is delivering traffic that isn't as useful to me as the traffic that Google provides - but it's delivering ten times as much for the same price. While using Project Wonderful is kind of like throwing mud at a wall to see how much will stick, enough of it does stick to make it a better target for my advertising budget than Google AdWords.

At this rate, I think I might have to look for server co-location in the USA and start up something over there - I have no doubt that the conversion rate would be higher if my prices were listed in dollars.

At any rate, I've been impressed enough with the return provided via Project Wonderful that I believe I may just sink a nice round British thou into it over the next four or five months - so if you see adverts for hostingforaquid.co.uk springing up on your site, don't be surprised. :)