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Sunday, July 5, 2009

Turnover Ratios

Another important part of earning with PTP is something I call a turnover ratio. This is a ratio that comes from companies figuring out how long their inventory stays in storage before being sold. It's also a ratio used that tells companies how fast they collect money from people who owe it to them. In the world of PTP there are two uses for this ratio as well. One ratio tells you how fast an ad you purchase finishes. This is important because if you buy an ad for 1 dollar that gives 5000 clicks Tier 1 but finishes in 5 months, it won't give you as much profit as buying an ad for 2-3 dollars that gives 5000 clicks and finishes in 1 month. The second ratio tells you how many days you have to click all of the ads on a website to be able to have a years worth of PTP clicks.

The first ratio is very important to know for a website. The turnover ratio for Tier1/Tier2 clicks is always longer than clicks for all tiers. This is quite obvious to figure out since targeting a smaller number of users will of course take an ad longer to finish. However, it's more important to compare the turnover ratio of advertising on two different websites. Take two hypothetical websites. Website A and Website B. Let us assume we have no target and are going for all tiers. Website A offers 10,000 clicks at 1 dollar and Website B offers 10,000 clicks at .90 cents. Most people will choose website B because it's cheaper. However, this is where figuring out the turnover ratio for a website is important. If Website A completes 10,000 clicks in 2 weeks and Website B completes 10,000 clicks in 4 weeks which is a better buy? Obviously Website A is now the better buy. With Website A you spend .10 cents extra but you get your clicks faster.

Finding the ratio though is much harder. To do this you'll need to keep stats of how many clicks you get a day from websites you have bought ads from. Assuming you are getting similar profits per 1000 clicks at each website you then only need to know whether the price is worth the speed in which you are getting the clicks. To find how fast I get clicks I simply find out how fast it takes an ad to finish 1000 clicks. To do this I first take 5 random days of clicks and take an average and call this clicks per day. I then take 1000 and divide this by the clicks per day to figure out how many days it takes to get 1000 clicks. You now know how long it takes for 1000 clicks to be completed.

This of course is not enough. Simply knowing how long 1000 clicks takes won't tell you whether you are making money or not. You need to know the average profit per day as well now. Right now we have a value that indicates days per thousand clicks. We would like a value that gives us the profit per day. Luckily this isn't a hard value to arrive at. To do this we simply take the value we have learned how to calculate which is profit per thousand clicks. This was gone over in my first introduction to PTP here. We then take this value and divide it by the value we just calculated to get profit per day.

Why do we go through all this trouble to calculate this? Because time matters when you are doing PTP. Profit per day is a much more accurate depiction of how much money you can make and this helps you buy ads that will turn you more profit.

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