While watching the Phillies game last night, I saw several commercials for both WebMD and Ask.com. Seeing commercials that promote websites is certainly nothing new, but these caught my attention because they relate to something I’ve been thinking about lately anyway: Does it pay off to advertise your site if your only income from the site is coming from display advertising? Well, common sense will tell you No here — Getting visits to your site through advertising is almost certainly going to cost more than the advertising revenue that those visits generate. But… Why are the big guys doing it if it doesn’t pay off? Are we missing a piece of the equation here? Yes we are: the difference between visits and visitors. Although the specific visits coming in aren’t going to generate as much revenue as what you paid to get them there, somewhere down the road (if you have a good enough site that they keep coming back) they will eventually pay back that original advertising cost. How far down the road? Well, that depends on a lot of different factors. But, here is a case study that you can use as an example.

My network is admitedly a small fish in this big Internet pond, so I don’t typically have a lot of advertising dollars available to throw around. In fact, I’ve never really spent anything advertising for it before a few weeks ago when Visa was nice enough to give me a $100 credit on Facebook Ads. (I have done a fair amount of AdWords management for my clients in the past though, so I understood how the whole CPC system was setup.) I decided to spend the whole thing on my running site and chose the keywords running, run, and marathons as the targets of my campaign. After playing around a bit the first couple days, I settled on $0.21 as my default bid per click and set a $10 a day limit (No, I wasn’t kidding when I said this was a small experiment). So, 11 days and $100.58 later, I had generated 472 clicks from 509,441 impressions.

Of course, not all 472 of those clicks turned into registered users on my site. There was a fairly high immediate bounce rate of 49% (which I’ve heard is common when using Facebook Ads). And, of those that remained, only 36 (15%) went through the registration process and became registered runners on the site. (Note: That 15% number seems low to me. I’m brainstorming ways of improving it. Maybe quicker registration? More appealing style? But, that’s a topic for another post…) So, I ended up paying $2.79 to acquire each new runner.

Now, registered runners average 44.8 page views each month. All my advertising revenue on East Coast Runners is currently coming from AdSense, so I can easily find that my Page eCPM (the average revenue from each 1,000 impressions) is $1.44. So, in theory, to pay back the $2.79, I’d have to wait for the runner to visit 1,937 pages. At 44.8 pages a month, that’s over 43 months away. According to this simple calculation, it would take three-and-a-half years to break a profit.

Of course, there are other things to take into account: runners from the original ad campaign might share the site with a friend (+), or they might stop using the site before their required 3.5 years (-). Also, the 92% of visitors who didn’t become runners generated advertising revenue of their own (+). But these are all tough (impossible) to calculate exactly, so for the sake of argument, I’m just going to assume that they balance out to zero.

To conclude, my little experiment found that CPC advertising for a site similar to mine is not worth it unless you’re willing to deal with a really long wait before seeing your money back. Maybe that’s what WebMD and Ask are banking on — the fact that the investment will come back far down the road. But, they certainly have different conversions, return rates, eCPMs, etc. so it’s tough to say for sure.