Let’s say you are a plastic surgeon and you have a book about surgery-free Botox that you want to give away. You decide to run and ad to drive people to get your offer. You put the ad up and you set a limit of $10 a day.
Google or Facebook looks at that and says, “Okay, they’re spending $10 a day and this is an offer for people who are interested in Botox.” Their algorithm then goes to work that will ensure that your ad appears in front of only people who are interested in Botox.
In other words, the only people who see your ad are the people who are interested in what you’re selling. Any time someone sees your ad and clicks on it you have to pay Google or Facebook.
Obviously, not everybody who clicks on your ad and comes to your page is going to buy what you’re offering.
So let’s say you have a decently converting offer. Conversion simply means out of all the people who visit your website and see your offer, how many buy? For example, let’s say that 100 people come to your website but only ten people actually get the book. Your page has a “conversion rate” of 10%.
Now can you see why you can have a $500 sales funnel and the goal is just to break even. Because if 100 people are coming to your website and only ten people buy, then only ten customers will ever see your next offer.
Out of every 100 people who actually see that second offer for $197, maybe only twenty of those are going to buy that. And out of those twenty that go on and see your third offer maybe only eight people are going to buy that.
If you’re running your ads on Facebook and it costs you $3 per click, then you will spend $300 for every 100 people who see your website.
That’s just for them to look at your offer. Yet may only have ten people pick up your book. (There’s no profit, as the postage just covers your costs). Out of those ten people maybe only one of them will buy your second offer. At the end of your first day, you’ve spent $300 and only made $197.