What is a web visitor worth?

Overview

Millions of words and thousands of articles have been written about search engines and other ways to get leads and sales from the Internet. Mostly all of this material has only confused the issue for real estate web site owners. The general idea that if enough random people visit your site then some of them will be interested in property in your specific area is absurd.

Goal

The goal of this article is to give real estate site owners a basis to evaluate the benefit or non-benefit to them of investing time and money into search engine positioning, pay per click advertising or otherschemes to augment their web traffic.  There is more on this subject at: www.SilkShorts.com. 

Basics

The keystone of evaluation is to come to a determination of exactly what a demographically targeted visitor to your site is worth to your bottom line. Moreover it means discarding the idea held by Madison Avenue type advertisers that "eyeballs" are the name of the game.

You want to have as many potential buyers and sellers on your site as you can afford and you want a site that will appeal to them and result in their contacting you instead of your competition.

Random, non-targeted visitors to your site are useless and worth absolutely nothing at all. However, the opposite is true of potential clients that visit the site. They have real value to you--how much each is worth is difficult to ascertain, but worth the effort.

Evaluating -- First Method

If you believe that flying by the seat of your pants is a great business plan, then you're wasting your time reading this. If, on the other hand, you are the type of business person who "does the homework", read on.

To evaluate any type of advertising means finding a way to measure results, hopefully to determine the return on investment or cost of sale for your product or service. In real estate the bottom line, the end of the evaluation process is a quantitative measure of commissions earned, or gross sales realized as a result of the subject program.

Relating that to your web site let's work backwards and find out what the value is of a visitor to your website. If we can estimate the value of one average visitor, then we can begin to evaluate various methods of directing visitors to a web site.

The following numbers are for example only. Each person must determine their own numbers in their own way, but, follow this reasoning…

The commission earned on an average sale for our imaginary broker is $10,000.

To make that sale he or she must show property to 5 average prospects.

To obtain 1 prospect via the web site, 300 demographically targeted average prospects must visit the site.

So it takes 1500 visitors (300 x 5) to create 5 prospect contacts to produce one sale worth $10,000.

Each visitor is then worth $6.70. If you pay $6.70 per visitor to the site to earn $10,000 then there is no profit at all.

It's clear that the more accurate you can determine the projected value of a visitor, the better your chances of making a good decision with respect to any program that will bring prospects to your site.

For instance: Suppose you decide that a visitor ultimately represents $5 in commissions. (providing the visitor is a real potential buyer or seller). You may decide that
paying more than $1.25 per visitor is about the practical limit. If your Internet advertising budget is $5,000 per month and, providing you are set up to handle the prospects, you can project an earned commission from that investment of $20,000 per month
($5 / 1.25 = 4; 4 * $5000 = $20,000) with a gross profit of $15,000. (Of course you must allow for the fact that the "payoff" may be weeks or months after making the investment.)

Evaluating -- Second Method

The weakness in this first method is the difficulty of establishing reasonably accurate values for the variables. Without a lot of experience and record keeping these are hard to estimate.

The second method involves parlaying the experience of your competitors to
reach a preliminary evaluation of your visitors.

It works like this: If one or more of your competitors are paying for traffic to their sites in a way that you can determine how much they are paying, and if they do that for a significant amount of time, you can surmise that they have determined that what they are paying is worthwhile. (You never really know for sure, but it's a pretty good starting place)

Evaluating -- Third Method

Unfortunately this is the method most site owners use. It is simply to take the word of any salesman who is pitching a "web traffic service" to you. The salesman is on commission and really knows nothing about your business except that he or she thinks you probably believe in the tooth fairy and intelligent design, so to call this method risky is understating it big time. Someone once said that "Experience is the best teacher -- but the most expensive" and it is. The usual result of using this third method is a lighter wallet with little or no significant return.

Once you have a feeling for the value of visitors to your site you can begin to evaluate the various programs we'll be discussing in future artcles.