Hotels Combined – My Response

Hi Adam,

Thanks for your response. I understand your dissapointment, hence why I have asked you to respond. Is it OK for me to post your email on the blog?

I will be doing a final wrapup, and my assesment will be that Hotels Combined can be profitable, but it’s not EASY money and the profit margin is still slim. Furthermore scaling a campaign and maintaining a profit margin may not be worth the investment of time, or the possible risk.

Obviously adding hotels combined as an additional revenue stream from organic sources could be a nice way to make a bit of extra cash. But this experiement was never not intended to consider long term organic growth and the growth of web assests over time, which may counteract short term loses. I believe my readers are aware of these issues.

The main reason for the large loss, is dumping keywords on the foreign countries. I did not spend time managing this as I should have.

That said, I kept an eye on the Australian campaign and still lost money…

Take this example of the Byron Bay campaign

This table is the “all time” results from the PPC Australian targeted search campaign. This is the “search terms” report that shows you what actual keywords were triggered and clicked by the “byron bay hotels” broad match keyword.

Again please note: this is not the keyword list, but the breakdown of which keywords were triggered by the broad keyword “byron bay hotels”

caravan parks byron bay	broad	1	1	100.00%	$1.25	$1.25	4
accommodation byron bay	broad	1	64	1.56%	$0.75	$0.75	7.84375
accommodation byron bay nsw	broad	1	3	33.33%	$1.12	$1.12	4.666666667
cheap accommodation byron bay nsw	broad	1	1	100.00%	$1.30	$1.30	4
byron bay accommodation	broad	10	1241	0.81%	$0.87	$8.71	6.860596293
accommodation in lawson ave in byron bay	broad	1	1	100.00%	$1.27	$1.27	2
byron bay bed and breakfast	broad	1	5	20.00%	$0.52	$0.52	8
byron bay accomadation	broad	1	4	25.00%	$1.00	$1.00	3.25
cheap accommodation byron bay	broad	1	2	50.00%	$0.79	$0.79	10.5
byron bay	broad	1	31	3.23%	$0.77	$0.77	5.032258065
hostels in byron bay	broad	1	1	100.00%	$1.14	$1.14	4
gay byron bay holidays	broad	1	1	100.00%	$1.30	$1.30	5
byron bay hotels and resorts	phrase	1	4	25.00%	$0.72	$0.72	6
byron bay hotels	exact	1	7	14.29%	$0.40	$0.40	4.714285714

As you can see I had 23 clicks in total. In my mind only 4 of these are bad, actually they are not even that bad, just not GREAT.

So lets say I had 19 clicks from good relevant keywords. My ad text clearly states you will be landing on a page which will allow you to compare and book the best hotels in byron bay…

Now lets look at my transactions report and reference the labels which I installed on Day 2.

8119992	5/11/2009 18:17	220.245.114.189		Advertisement	Tweeve	0.14	Byron_Bay
8120023	5/11/2009 18:25	220.245.114.189	RoamFree.com	Book Button	Tweeve	1.151	Byron_Bay
8120242	5/11/2009 18:49	124.186.164.173		Advertisement	Tweeve	0.14	Byron_Bay
8120460	5/11/2009 19:06	124.186.156.80		Advertisement	Tweeve	0.14	Byron_Bay
8191440	9/11/2009 18:57	120.155.254.148	RoamFree.com	Book Button	Tweeve	1.16	Byron_Bay
8222402	11/11/2009 3:23	122.148.114.190		Advertisement	Tweeve	0.14	Byron_Bay
8222570	11/11/2009 3:30	122.148.114.190		Advertisement	Tweeve	0.14	Byron_Bay
8561240	29/11/2009 4:12	24.76.161.223		Advertisement	Tweeve	0.14	Byron_Bay
8561257	29/11/2009 4:15	24.76.161.223		Advertisement	Tweeve	0.14	Byron_Bay
8561404	29/11/2009 4:22	24.76.161.223		Advertisement	Tweeve	0.14	Byron_Bay
8616426	1/12/2009 19:06	122.57.7.164		Advertisement	Tweeve	0.14	Byron_Bay
8684065	4/12/2009 20:17	122.109.33.215		Advertisement	Tweeve	0.14	Byron_Bay
8684066	4/12/2009 20:17	122.109.33.215		Advertisement	Tweeve	0.14	Byron_Bay
8721102	6/12/2009 20:27	220.233.104.53		Advertisement	Tweeve	0.14	Byron_Bay

I have a total of 2 book buttons and 12 adsense clicks

This is not a 50%-100% conversion rate…

It also reinforces my theory that the adsense units with a flat payout of $0.14 are bad. Since it would be impossible to buy a click to byron bay under $0.14….

I plan to continue my Australian campaign this month AND keep a good eye on it. I would be willing to take any advice you have. Using the above example how could I improve my visitor targeting?

Perhaps if you gave me a list of your top 10 australian regions with the highest conversion rates, I can run an even smaller isolated test on these?

I will supply some conversion tracking in the next few days.

Regards,

Robert Austin.

Hotels Combined Response

I emailed hotels combined and asked them to respond to my experiment. Here it is.

Hello Robert,

Yes, we noticed that you completed your test.

Frankly, I’m a bit disappointed by your efforts.  It doesn’t look like you did anything to optimise your keywords, text ads or bid prices, and you didn’t come back to me for advice once you started losing money.

Overall, your Leads were very good quality, but your Visitors seemed very poorly targetted.  I can tell this because your Visitor-to-Lead conversion rate was only around 7.5% for hotel Leads, and also because around 37% of your Leads were from clicks on Google ads.  Most good Affiliates have an average Visitor-to-Lead conversion rate of 50 – 100%.  Also, most Affiliates only earn less than 5% of their revenue from Google ads, so your high percentage shows that your visitors just aren’t interested in our hotel comparison service.

My suggestion would have been that you used the Label parameter to track the performance of each of your keywords or text ads.  You could even have provided me with your Google Analytics conversion tracking code, so I could’ve placed it on your conversion page.  My experience with AdWords tells me that this would’ve helped you identify poorly converting keywords that you could’ve removed from your adgroups.  For example, the keyword “hotel” appears good at first glance, but if you had it on Broad match, it would attract traffic from searches such as “hotel employment opportunities” or “buy a hotel for investment”.

One of your conclusions was that our Google ads don’t help your profitability.  This is not entirely correct.  Each Visitor can generate multiple Leads, so it adds an extra revenue stream.  Consider an end-user who clicks on a hotel link.  The provider’s website appears in a new window, so when they complete their reservation, our website is still open in front of them.  If they then decide to book a flight or hire a car, they might well reach their next website from one of the Google ads on our page.  In this case, even though you only earned $0.14 from the ad click, you actually earned two commissions from the one Visitor, which should serve to increase your overall Visitor value.

Your comment in week 3 doesn’t give me confidence that you tried very hard at this when you said:

“To be honest I didnt really keep an eye on things this week. Just let it run away.”

If I found that I was losing money each week for the first two weeks of an ad campaign, I would not have simply “let it run away”.  Even if I did, I would not have expected there to be any marked improvement in the situation at the end of that period.

Anyway, I apologise for the negative tone of this email.  You probably tried your best, based on your current experience with paid search and affiliate programs.  I hope that in future you make more effort to reach out to possible sources of assistance.  For example, in this situation I was more than willing to offer my many years of AdWords and affiliate program experience to you in the form of advice and technical support.  If you decide to continue with our Affiliate Program, that offer will still stand.

Regards,

Adam Zebrowski
Business Development

Wrapup – Hotels Combined PPC Affiliate Experiment

So the Hotels Combined experiment has finished. Here are the final results.

Total Expenses:$613.20
Total Commissions: $176.16

Total Profit: -$437.04

Conversion Rate Lower Then Expected

One of my major concerns early on in week 1 was the conversion rate. Week 1 – 2 was the most controlled and targeted part of the campaign ( before I started dumping dozens of other countries into the campaign ) Even during this time, conversion rates were lower then expected.

So up until this point, the whole process is free, without obligation. This should mean alot more conversions… But that doesnt seem to be the case.

Furthermore, It got me thinking, once people have clicked out to book ( when you get paid for the lead ) they are pretty much gauranteed to pay for that booking.. They have commmitted. Because if they are NOT committed they would just leave or keep searching… There is no reason for them to click and book with a supplier unless they are ready to book!

The Adsense Units Are Bloodsuckers

The adsense ad’s actually get clicked ALOT. even more than the book button. The problem is, the adsense clicks are paid out at a flat rate of $0.14…

Why is this a problem?

Visitor from london

CPC = $1.00
If they click the book button I get = $1.20
If they click the adsense unit I Get = $0.14

Visitor from port fairy ( real place )

CPC = $0.40
If they click the book button I get = $0.70
If they click the adsense unit I get = $0.14

The adsense payout does not scale with the cost of buying clicks from higher paying regions. In fact, every adsense click, no matter which keyword it comes from, will LOSE MONEY. Furthermore it stops any opportunity for that visitor to click the “book button”

** There is an option to turn off the adsense units ** This is probably a sensible choice.
What really needs to happen is adsense clicks need to be variable. The affiliate should get 60% of the actual adsense profit…

Alternatively… Add you own adsense units into the header and footer????

How Could Hotels Combined Be Profitbale?

• Adsense payout 60% of adsense profit rather than flatrate of $0.14
• change the “book button” when you get paid for the lead to here. perhaps call this a “soft booking” and payout 30% of the “book button” payout. maxed at 2 clicks per unique IP.
• Increase the payout. average payout is $0.60 – $1.30. This needs to be $1.00 – $2.00

Week 4 – Hotels Combined PPC Affiliate Experiment

End of week 4.

Week 2 Expenses:$133.28
Week 2 Commissions: $24.89

Week 1 Profit: -$95.93
Week 2 Profit: -$83.71
Week 3 Profit: -$140.83
Week 4 Profit: -$108.39

Total Profit: -$428.86

Coming close to the end of the experiment. I’ve pretty much stopped all other countries except for Australia, just trying to turn a profit margin again, however small.

Week 3 – Hotels Combined PPC Affiliate Experiment

End of week 3.

Week 2 Expenses:$174.14
Week 2 Commissions: $33.31

Week 1 Profit: -$95.93
Week 2 Profit: -$83.71
Week 3 Profit: -$140.83

Total Profit: -$320.47

Week 3 I kept pumping some of the other countries other than Australia. Results just got worse.

To be honest I didnt really keep an eye on things this week. Just let it run away.

Week 2 – Hotels Combined PPC Affiliate Experiment

End of week 2.

Week 2 Expenses:$153.41
Week 2 Commissions: $69.70

Week 1 Profit: -$95.93
Week 2 Profit: -$83.71

Total Profit: -$179.64

During Week 2 I enabled a content only campaign for Australia, which did ok.

I also started added new countries on mass… Japan, Austria, Belgium, Denmark, United Arab Emirates, Switzerland

This was overall a pretty big failure. Japan had alot of cheap clicks but no conversions.

In fact the United Arab Emirates was the only other country with some potential.

Week 1 – Hotels Combined PPC Affiliate Experiment

End of week 1. Overall the campaign is not profitable so far. But on day 1 & 6 I made a small profit, which is hinting at a profitbale arbitrage opportunity.

I went a bit crazy on Day 5, breaking my rule of a max bid $0.30 and going up to $1.00. This was probably a bad move, I became impatient, More on this in a sec.

Expenses:$143.21
Commissions: $47.28

Week 1 Profit: -$95.93

Google Spending Vs Hotel Combined Commissions

Here you can see how much I spent per day on Adwords, how much I earnt on hotels combined.

Hotels Combined Transactions Report

The transactions report is not enabled by default, you need to request it. I strongly recommend you do, because without it you cannot identify which keywords are converting. Adam “The Captain” from hotels combined was nice enough to contact me and offer to enable this report on about day 2. Great support from Hotels combined.

Labels

Labels allow you to track which keyword’s and traffic sources are leading to actions. You need to manually tag your links with labels.

As you can see on day 1, I have no labels, hence no way to identify which keywords from my PPC campaign actually generated sales. So I went back through my campaign and added labels to everything.

I added the label paramter to all of my destination URL’s within the adtext

Example: http://www.tweeve.com.au/City/Healesville.htm?label=Healesville

Important Notes About Deeplink Naming Convention

Deeplinks are highly case sensitive. It took me a while to get this.
The golden rule is: You must write the links as they appear in the hotels combined data feed.

For Example…

• http://www.tweeve.com.au/City/Coffs_Harbour.htm?label=Coffs_Harbour – Label Remains Complete
• http://www.tweeve.com.au/City/Coffs_harbour.htm?label=Coffs_Harbour – Label Breaks

The 2nd link breaks, because the H is the wrong case… hence it redirects, and your label is stripped.

DO NOT MAKE ALL LINKS Capital Case…

At first I thought it would be correct to just make all links Capital_Case, but this is wrong.

For Example…

• http://www.tweeve.com/City/Umm_al_Quwain.htm?label=Umm_al_Quwain – Deeplink Works, Label Works
  
• http://www.tweeve.com/City/Umm_al-Quwain.htm?label=Umm_al-Quwain - Deeplink Breaks , Label Breaks ( lands on default homepage )
  
• http://www.tweeve.com/City/Umm_Al_Quwain.htm?label=Umm_al-Quwain – Deeplink works, Label breaks
  

So what is correct?
The only correct method is to use the exact cityFileName data from the hotels combined spreedsheet. Sometimes it is capital case, other times there are lower case letters mixed in.

If your using speed PPC, i would recommend the following method to clean your city keywords list.

First in excel isolate the cityfilename column in it’s own sheet. remove duplicates, use find and replace to change all _ & -  with a space.

Copy and paste into speed PPC.

I have wrapped this quick guide into it’s own post: Hotels Combined Labels & Deeplinks – Correct Naming Conventions

Day 5 – The Dump

On day 5 I got impatient, The last few days had seen some profitability but on a tiny scale. I wanted test results back quick and I wanted to see the payout and conversion rate from more popular areas like capital cities such as brisbane etc.

As you can see the ROI was a bombshell, lost alot of money here.

Day 6 & 7

Back to the regular pissy little trickle of traffic at $0.30 max bid. Back to profitability.

Concerns

A couple of things concern me.

• Heaps of people click the adsense ad’s, but the payout is a flat rate of $0.14 Even in more popular regions ( where the adsense payout should be higher ) it is still $0.14 – This is a killer.
• The “Book Button” conversion rate ( which gives you the most cash ) is much lower than expected.
• The “Book Button” Payout varies ALOT. You really need to identify the regions which pay $0.80+

Campaign Setup – Hotels Combined PPC Affiliate Experiment

So Hotels Combined offers a white label branding solution. This means we can pretty much just re-label their entire website and use our own domain. Really great for lazy PPC strategies because we don’t need to build any pages.

It also allows us to use our own domain in the Google ad text which gets rid of annoying destination URL issues. It is also important to avoid copyright / ppc rage from the affiliate program.

Using PPC to promote affiliate products these days can be heavily restricted and can often result in your commission being withheld. Make sure you read the TOC carefully and remain compliant. Bidding on their brand keywords, using their brand in your ad text, or using their domain in your URL are all pretty bad ideas…

Introducing… Tweeve

I’ve quickly purchased 2 domains. tweeve.com and tweeve.com.au. I wanted a short domain so I can use /sub folders/ in the Google ad text. Some region names like “sunshine coast” can be quite long, so they shorter your domain the better.

Since this whole thing is setup on their private labeling system there is no chance it will be indexed by Google. SEO just isnt a factor. So using a keyword stuffed domain has no value…

A domain which has branding potential would actually be more valuable here. Maybe some people will return directly… maybe not… but like I say, SEO is not possible so go the brand for an extra trickle of return traffic.

Hotels Combined Data Feeds

Looking around in the affiliate area I can see Hotels Combined offers some very nice data feeds. All hotel, region, pagename information is available for download in .csv files. This is perfect for rapidly setting up a PPC campaign.

I grabbed the .csv file which includes everything ( all countries, all fields )

I’m going to scrub these quickly for the data I need.  I’ll do this manually through excel.

Basically I’m just going to wrap a table around the entire sheet. I’ll then filter by country > australia. Copy and paste this data to a new sheet to isolate it.

Then i’ve removed any columns I deemed useless, keeping the city name and state.

Rather then dumping every city in australia into the PPC campaign I only wanted to start with what I like to consider tier 1 & 2 regions. I have a bit of a method for rating regions.

Regional Tiers

• Tier 1: Brisbane, Sydney, Byron Bay
• Tier 2: Mooloolaba, Coffs Harbour, Port Macquarie
• tier 3: Bobmolvi ( insert small town you have never heard of here )

Understanding these tiers is important to travel affiliate marketing. Tier 1 regions are to competitive and the CPC is to expensive. They have the most inventory and the most search impressions.

Tier 2 are regions which are popular enough to have decent inventory but still arent tourism behemoths. They are often growing in popularity and are sub regions of popular spots. Many tier 2 regions are quickly turning into tier 1. Tier 3 destinations take longer to become tier 2, or may never become tier 2.

Tier 3 normally have little inventory, making conversions harder.

The thing to understand is, the CPC can often be similar for tier 2 and 3. But when the user arrives on a tier 3 affiliate page and only 1 -2 hotels are available, they bail.

Spreedsheet Now Ready

I added another column to my spreedsheet so i can just place an “x” next to cities which I believe fall into tier 1 and 2. I’m going to run tier 1 regions but anticipate this wont even make it onto the SERPS.

I’ve also got another column called “to strange”. It’s basically just a way to filter out any regions which have unsually long or difficult names to use in the PPC campaign. Since I plan to auto generate my entire campaign, small anomolies are better to be removed at the start. Don’t get caught up in making every variation fit, you will probably comprimise the other 90% of your campaign to make everything work.

Ok so my data is ready to go, all up that’s taken about half an hour.

Using Speed PPC to create the Campaign

I’ve tried both speed PPC and efficient PPC and Speed PPC is clearly better. I’m not a huge fan of these programs but they do work well for campaigns where geo region is the main element. Which makes them perfect for travel affiliate marketing.

Just copy and paste your cities into the seed box, set your expansion and settings and away you go.

Create your text ad and use the {Seed} etc variables.

View your output, make sure it’s legit.

Copy and paste into adwords editor.

It will probably take a few trys to get the formula working for every ad group.

Once you have pasted into adwords editor, you will probably need to manually clean some of the ad text up. Normally ad text which exceeds the character limit.

Upload Campaign & Grab A Beer.

That’s it. The campaign is now live, and I’ll report in a few days to show you the results, earnings etc.

Rules – Hotels Combined PPC Affiliate Experiment

Rules

• Affiliate: Hotels Combined Affiliate Program
• Timeframe: 1 Month: November 1st 2009 – November 30th 2009
• Google Adwords Budget: $1000

Goals

• Goal 1: Proof of concept that the arbitrage opportunity is profitable
• Goal 2: PPC campaign is sustainable.
• Goal 3: Scale PPC Campaign so the daily profit is worth getting out of bed for.

Let the games begin!