One of our partners has kindly consented to let us show you one of his small campaigns that show how one can profitably earn from niches and careful geographic targeting, using only Google pay per click campaigns. It is a very simple campaign and does not take advantage of the many features one can use to optimize the campaign. However it is a good example for those starting out.
The case is for, a German language disabled dating site for German speakers.
Below is a picture of the site. Nothing fancy as you can see, just a basic template from the selection available from the Dating Factory admin in site creation.

The sections marked in red are the optimization of the site for better keyword ranking in Google. On top is some H1 text , on the side some keywords and on the bottom some body text.
Together with the site title and meta tags this tells the search engines it is a dating site for handicapped people so keywords with handicapped dating will score well.

So the site is simply set up so let’s take a look at the settings for the Google campaign.

In the above screenshot you can see the locations are very specific as well as the languages the searchers use, so I can be sure I get only German speaking people from these countries. The campaign will probably miss out on a few that have English or other language browsers but want to contact German speaking disabled people but better to miss out on a few than pay too much on the campaign. It will be better to make another campaign on a different site for those exceptions if you really want to capture them.
As for other settings they are pretty much basic and default on Google.

The ad rotation is set to show the most successful ads most
Next we take a look at the ads, below you will see that 4 ads have been created and by testing and monitoring two have been left active and 2 paused . The ad rotation has selected one particular add to show most of the time. This is not so bad, sometimes too many ads create a lot of clicks from people who have already clicked on another ad and didn’t realize it was for the same site so it’s a wasted click.

As you can see from the above one add got, for the month of December, 885 clicks for a total cost of 178 (145€) Swiss Francs, an average cost of acquisition of a member of 2.63 CHF (2.15€). Average cost per click was 0.20CHF and average position was 4.9
If we now look at the keywords campaign we can look into a bit more depth, below is a keyword report on some of the keywords used on this campaign. Sorry the keywords themselves are blacked out at our partner’s request, but they are not too relevant to the case study anyway.
You can see that most of the keywords have a good quality score ( this makes you position for the amount you bid better) The average position is all on the first page between 3rd and 4th. Conversion rates are above 10% and cost per conversion averages 2.07CHF (1.70€).
Total conversion were 87 for a total cost of 180 CHF (148€). These figures are for the whole month of December.

If we now go to the admin at Dating Factory we can compare the performance and see it this campaign is profitable.

We can see we had 99 confirmed registrations, Some extra than what was sent by Google, as this site has some organic traffic and from links from other sites. 3 people paid new subscriptions and 13 paid recurring subscriptions generating an income of 254€, clearly a profit from the investment made in advertising on Google which cost 148€.
Of course there are many other metrics we could show you and over longer periods of time. Here are the same reports for the whole year 2011. Cost 1931CHF (1582€) Earnings 3071€, profit 1489€ which means 48.5% profit.

Another way of looking at it though is on return on investment. This site started on 1 January 2010. The following graph shows the investment in AdWords has been relatively constant, just under 200CFH (163€) per month.
The returns, according to the report of payments by month shows that already in February there was some income and after 3 months the campaign was profitable. So the maximum investment would be around 3 to 4 months of pay per click costs and after that it became profitable. This means Total investment of let’s say 4 * 163€ = 652€ to earn 1582€, a return on investment of 250%, better than most banks are giving nowadays. Note how as the recurring revenues kick in the profitability rises.

One of the numbers to monitor carefully as an indicator is the revenue per registered member, in the case above 2.54€, while the cost of acquisition was 1.70€. Please note that this figure includes the recurring revenue. You will not easily reach this just with initial payments so when you start a campaign you may find you are losing money. The thing to remember is that typically people stay on the site for 3 to 4 months before they cancel and stop paying so any initial payment you receive you can multiply by 3 to project your average income per member in the future.

In Summary

A profit of 1500€ in a year does not sound like a lot of money for the effort but remember that this example only addresses a small niche community in a small defined territory. If you had ten different sites addressing different languages or geographical areas on the same niche that performed like this one you are looking at 15000€ per year and if you do ten different niches you could be earning 150’000€ a year. Also the campaign can be optimized extensively to provide better returns and you can run campaigns on other search engines like Bing.
The main thing to remember is measure, optimize, tweak, be ruthless in deleting non performing campaigns or keywords. It is a pure maths game. There are no instant riches and it requires work, anyone promising you will get rich by sitting back after 10 minutes work and just watch the money roll in is definitely not being honest with you.