In poker, your bankroll refers to how much budget you’ve allotted to play, a concept that isn’t thought of in online marketing even though it’s value to online marketers is huge.
In a poker cash game (aka sit-and-play, as opposed to a tournament where everyone starts with the same amount), your budget is how much you choose to sit down at the table and play with – your total risk. Lose all of that and your game is over.
Let’s take an example to understand how the bankroll works.
Imagine you’re playing No-Limit Texas Hold’em Poker, and you’ve got $100 bankroll. The table stakes are $25-$50, meaning that the small blind bets $25 and the large blind bets $50.
If no one raises, the most a $100 bankroll can do in such a case is play two hands.
Obviously then, a $100 bankroll gives you very little chance of success, since it’s statistically easy to lose two hands consecutively.
Suppose instead the limits were $1-$2, and that the rest of the people only have $50 bankrolls.
Suddenly that $100 bankroll is a pretty significant advantage: you can play up to 50 hands without raises, and this is twice as many hands as competitors.
How does the poker bankroll apply to online marketing?
Generally speaking, the link is that successful marketing follows a cycle – which you need to see through in its entirety to be successful. The steps are:
2. Execute. (Run the campaign.)
3. Measure. (Analyze your analytics data.)
4. Optimize (cut what’s not working, increase what is) and execute again.
A. Pay-per-click marketing is the most direct application of the bankroll .
If you are committed to spending only $100 on clicks and your average CPC is $2, then you can try your luck for up to 50 clicks without a conversion.
Considering that random probability means you might easily go through 50 clicks without a single conversion (especially with average conversion rates being only about 2% in ecommerce), then you’re not really doing PPC marketing – you’re doing PPC gambling.
You’ve got $100 of lottery tickets and are hoping one of them will get you luck and earn you what- $150? $200 at the most optimistic?
Most importantly, such a tiny bankroll doesn’t give you enough time to optimize. You might run out of money before even getting statistically useful data to measure/optimize with.
B. Contract lengths are another application of the bankroll.
In the past I and others have tried to offer month-to-month renewable contracts for search marketing services.
Why? Because it encourages short-term thinking and you can NEVER do your best in such a mindset. For a simple example, link building and social media require building relationships, and 30 days just doesn’t suffice … and even 3 months is very little.
C. Being a jack-of-all-trades consultancy/agency/webmaster (hint you’re a master-of-none)
Do you do print design and web design and SEO and social media and PPC?
Unless you’ve got lots of staff who specialize in each discipline, you’re watering down your offering.
Each of these have developed so much that it’s difficult time-wise for anyone to keep their skills up to date in each field.
The bankroll here is your time – how are you going to spend it?
I know when I got into online marketing, I read sites that talked about domaining, affiliate marketing, SEO etc – and proceeded to try my hand at each discipline.
Guess what? I’ve wasted thousands of dollars on domains, loads of time, and my affiliate marketing to this day is paltry. Had I spent all my time on SEO, I’d have saved lots of money and been a better linkbaiter.
So how do you determine the right bankroll?
The correct bankroll varies, but it depends essentially on how many times you need to repeat your bet before you can be successful in a regular way (i.e. your conversions will be frequent and profitable enough to cover your click/consulting fees).
If we’re talking about PPC click budget – it’s the amount of time necessary to collect enough data and optimize.
If we’re talking consulting – you want to give your agency at least 6 months for either SEO or PPC. This accounts for the reality that a consultant/agency rarely has only one client whom they spend 100% of their time on.
Inhouse staff solely dedicated to this would still take at least 4 months, because there are setup tasks and time costs independent of consulting/agency – e.g. the volume of traffic available, time to create landing pages etc.
Learning a new discipline: A few years – enough to gain intermediate skill and see if you enjoy this and can earn a stable living.
How passionate are you about the discipline? Speak to people with several years experience to hear the downsides and think how you’d be affected. This can save you lots of heartache starting something you later discover has a downside you loathe (ex.: bad clients, reporting etc.)
Got somewhere else this applies? Love to hear your thoughts in the comments.
P.S. You independent webmasters out there: Take the “Is Your Site Defensible?” 10 Point Quiz. This also ties into what I wrote about multi-armed bandit algorithms for CRO, which is another application of the bankroll concept.
P.P.S. The bankroll is another face of the concept of Expected Value, which I discuss in the Rules section of The Advanced SEO Book.