To pay or not to pay

Paid Listings are everywhere. There is no shortage of individuals and businesses out there willing to take your money to display a link for you.

The questions you have to ponder are:
1) Am I getting my money's worth for this paid link?
2) What are the short term and long term costs involved? and can I sustain them?
3) What are the short and long term benefits and consequences of a particular link?
4) Am I dealing with a trustworthy individual or business?
5) Is the business I'm dealing with careful about who they outsource to?
6) How do I calculate ROI? How frequently can I calculate ROI? How frequently do I need to analyze this particular purchase?
7) Is my money better spent on an alternative marketing technique?

Simply because there is a plethora of options for link purchasing, a great deal of due diligence should be spent before you spend a dime. Even when considering purchasing paid links through programs with great reputations - like adwords or overture - there really is much more to it than you would think.

Understanding your own strategy before you spend any money is important. In order to do that you must arm yourself with knowledge about yourself and about the marketplaces you are about to enter in to.

A question that is commonly asked by sales people is "What is your budget?" In the webmaster world, this can be a difficult question to answer. The budget can change based on the effectiveness of the advertisement, personal situations, changes in site revenue, and the balance on the visa card. A question you must ask yourself first is - "What do I expect to get out of the deal?" That question must be answered before you can even begin to contemplate how you will calculate your return on investment.

In the product world, calculating ROI is a relatively simple process. You take the difference in your profit between prior to your ad campaign and after your ad campaign. If you made $100/month before your ad campaign begun and $150/month after your ad campaign took place, and your investment in the advertisement was less than $50 you are in good shape. For most websites, though, the formula gets more complicated.

A simple way of looking at things is calculating your average revenue per visitor. Look at your average revenue per visitor before, during, and after a particular campaign, and also at the quantity of visitors you receive. Increasing your visitor count is one aspect, but if you increase your visitor count significantly, and your average revenue per visitor decreases significantly at the same time, you may be putting a lot of effort and money into a campaign that is not necessarily worthwhile. Be careful of just looking at things in short term gains, though. Increasing the amount of regular visitors and therefore producing repeatable revenue can provide profits perpetually.

In the future, I'll discuss the various paid options individually and mention the unique aspects that should be analyzed. A paid link may not produce visitors directly, but it could be invaluable if it helps your search engine rankings significantly in a particular market. Conversely, an adword advertisement has a more direct correlation to revenue and will not (that I know of) help your search engine ranking, so long term revenue is less of a factor - although consistent advertising can serve as a PR resource and help to brand your site.