Conversion rate can change from one industry to another. One industry (particularly those in the shopping niche) tends to have higher conversion rate. Websites such as Amazon and EBay reportedly have conversion rates around 5% to 10%. If any person shops in Amazon, most likely they will find the things that they need to buy; thus this explains one aspect of such high conversion rate.
In independent/online music publishing industry; this conversion rate is not the same. If you would like to know the actual figures; you can see how our catalog performs in terms of free music downloads conversion rate.
Conversion rate and download statistics of our catalog as of September 2, 2011:
Total number of successful downloads = 501
Total number of unique visitors = 53654
The scope of the data is from November 12, 2009 to September 2, 2011.
Therefore the overall conversion rate of the music is around:
Conversion rate = (501/53654) x 100% = 0.934%
Well I can say that its very low compared to what will be the conversion rate of Amazon and EBay, nevertheless this conversion is OK provided the profitability target of the website has been attained.
Take note that this is free download music conversion rate. If you are not offering free downloads, you should assume that your conversion rate is way smaller than that (because only a small amount of visitors are willing to buy and everyone loves free). I do not have exact figures and you need to assume.
UPDATE: July 26, 2012 – I’m transferring my music catalog to a new URL. It is not anymore free but I dropped a lot of search engine traffic after that change, probably in the future when the page will have some decent amount of visitors I can provide an updated conversion rate data.
For example, you would like to start an online music publishing website. One requirement is that you should estimate the profitability of it considering how much will be the income and operating cost of the website. So how can you assess the potential profitability?
Let’s start with the following assumptions. Assuming you have:
Unique visitors = 6500 unique visitors in a single month
Average license fee per customer download = $20
Conversion rate (significantly lower than free downloads, say only 1/8 of it) = (1/8) x (0.934%) = 0.117%
These are your website operating cost per month:
Average hosting cost per month = $5
Average domain registration cost per month = $2
Total income per month (Gross):
Gross Income = Conversion rate x Unique Visitors x Average license fee per customer download
Gross Income = 0.117% x 6500 x $20
Gross Income = $152.1
Total operating cost = $5 + $2 = $7
Net income = Gross Income- Total operating cost = $152.1 – $7 = $145.1
So you earn a profit of $145.1 each month for those assumed statistics.
Some scenario on improving music download profitability
What will happen if you implemented some website improvements that doubled your conversion rate at the same level of unique visitors and cost?
Gross Income (at doubled conversion rate) = (0.117% x 2) x 6500 x $20
Gross Income (at doubled conversion rate) = $304.2
Net income = $304.2 – 7 = $297.2
So your profit would also double.
What will happen if you have successfully doubled your unique visitors at the same conversion rate and cost?
Gross income (at doubled unique visitors) = (0.117%) x (6500 x 2) x ($20)
Gross income (at double unique visitors) = $304.2
Net income = $304.2 – $7= $297.2
So it would end up having the same profit with before. Maximizing profit, you need to look into improving these things:
a.) Conversion rate
b.) Unique visitors
c.) Average license fee per customer download
This is just an example on how to assess your website financially if you are starting to have an online music publishing business.
Final Word of advice on beginning musicians
Like other businesses, allow more room for yourself and your catalog to grow. This is not your overnight business success type. It can take years before these things can be truly profitable. The secret is to manage the cost and risk of the business. This is one of the most powerful skills that the entrepreneur should possess.
Below are some great tips that you can implement to increase your music download:
1.) Establish credibility– Some artist do not put importance on this. They simply perform, sell songs and nothing else. You need to communicate with your fans and talk something interesting, probably through a blog, etc. Once you start building relationships and authority, credibility will follow. This will have a profound effect on your music downloads.
2.) Great songs and great recordings – You should have these both. Listeners are often sensitive to amateurish recordings. Make your recordings to sound as professional as possible without breaking your wallet. The fans won’t be disappointed and will treat you as a professional.
3.) Easy to use website – self-explanatory, no one would like to download music if it requires too much information from the user.
4.) Start small, slowly grows big– one big mistake is to immediately grow big by investing a lot of cash. But if the downloads were poor, you would have very small return in your business and you cannot expand further. Start small and then use your earned profit to grow big. Learn from your mistakes! Never stop experimenting things that can help in improving your business.
5.) Analyze your stats – finally you need to analyse all the data pertaining to user downloads. It can provide a lot of clues whether there are problems with your catalog, etc.
Good luck in your entrepreneurial endeavors!
Content last updated on October 8, 2012