Advertising is a way to take your Etsy, crafty, or creative business to the next level, but when you are just starting out, it can be difficult and overwhelming to figure out how much you should pay for it. How do you know if it’s effective? How do you know if it’s worth the cost?

Let’s walk through figuring out how much advertising is worth to you

In the start-up and internet marketing world, people often talk about ‘CPS’ (cost per sales or subscription), ‘CPA’ (cost per acquisition) or ‘CPI’ (cost per impression). This is how you measure advertising. Basically, all it is saying is: How much did it cost you to get 1 result you wanted? The 1 result might be a sale, a Facebook like, or a view on your blog.

Since, ultimately, I’m pretty sure you all want sales, let’s talk in terms of sales. First, we need to figure out how many views it takes to make a sale. Since this is the price you should pay per view from advertising, we’re going to call this price per view. If it takes 25 views to make a sale on a $25 item, you don’t want to pay more than $1 per view, because then you would lose money. In fact, I’d say you don’t want to pay more the $0.50 per view (half of $1), because, hello! you have costs too.

Let’s calculate how much you should pay for a view on your site

Before we go further, I want you to be careful here. Advertisers will talk about views. When an advertiser talks about views, they are talking about views on their site. We are talking about the views on your site. If they get lots of views, but no one clicks over to your site … who cares? It’s not helping you.

The average “click-through rate” or percentage of times someone viewing an advertiser’s site clicks through to your site, is .01-0.3%. If the advertiser has 100,000 page views a day, then that would be 1,000-3,000 views per day on your site. That said, if you target your advertising well, that percentage might be higher.

The first few times you advertising, it’s scary, but you need to try out a bunch of things to figure out what works. Set a budget for yourself and experiment. Once you start advertising, you’ll want to measure how effective that advertising is.

Let’s figure out if your advertising is working

You’ll want to keep track of a few things for each ad:

Dates the ad ran

How many total views your site got during that period

How many of those views came from the ad (“Referrals”)

How many sales and how much money you made during that period

Let’s figure out how much the Ad cost you for each view

We’ll call this cost per view from the Ad.

Let’s figure out how much money you made from each of those views from the Ad

We’ll call this value per view.

Let’s figure out if the Ad was worth the cost

We’ll call this value of Ad view. This is basically how much money you made for each view the Ad sends you. If this is positive, you made money! If not, then you lost money and this is probably not a good way for you to advertise.

Phew. I know it’s a lot to wrap your brain around, so I created a free worksheet for you! It’s an Excel workbook with 2 sheets:

“Ad campaigns” will help you keep track of the important data about each campaign and calculate the cost per view, value of each view, and the value of each view from the ad.

“Cost per view” calculates the preliminary about by dividing your total sales by your total views. Our suggested cost per view is 50% of that value.

Questions? Leave ’em in the comments!