The Perfect Perpetual Point Machine, Part Three

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In part one of this series, I introduced the idea of the quest for the perfect perpetual point machine. A perpetual point machine (PPM) is a scheme in which, after a little push, hotel points and/or airline miles are accrued over and over again, forever, with little or no additional work or money. In itself, this sounds great, but I also introduced some rules that would be necessary for the machine to be perfect:

  1. The PPM may take effort and money to setup initially, but must not take much effort or money to keep it going.
  2. The PPM must be able to generate hundreds of thousands of points per year.
  3. The PPM must do no harm.
  4. The perfect PPM would also somehow do some good for the world, not just for the recipient of the points.

A New Idea

Previous attempts toward creating PPMs involved buying gift cards through online shopping malls that award points for each purchase. We came close to a working PPM in part two of the series, but then the Ultimate Rewards Mall suddenly dropped the number of points awarded for Sears purchases from 10 to 5 per dollar. While this is still a good deal if you need Sears stuff, it is not enough of a bonus to make a PPM work.

The new idea here is to use online advertising as a way to both spend money and to earn money. If you can balance your spend such that it perfectly matches earnings driven from the spend, then you will be able to rack up huge numbers of points via whatever rewards credit card you use. If your goal is to accumulate points, then look to the American Express Gold Business card which offers two points per dollar spent on advertising and currently comes with a 50,000 point signup bonus. If your goal is airline or hotel elite status, then checkout ThePointGuy’s post on how to spend your way to elite status.

Until a few weeks ago, I had no experience with buying online ads or using ads to generate revenue. However, I was vaguely aware of a couple of things: 1) Google Adwords allows you to buy ads that show up next to Google search results, and you can set your own price on the most you will pay, and you only have to pay if your ad is clicked; 2) If you have a web site, there are (at least) two ways to get paid for ads that appear on your site: 1) cost per click (CPC) and 2) cost per mille (CPM). With CPC ads, you only get paid if someone clicks on an ad on your site. With CPM ads, you get paid for every 1000 page views (also called “impressions”). I came across a company named ContextWeb that facilitates setting up CPM ads on your site and allows you to set your own price. So, the idea I had was to create a simple web site using free online tools, and then pay Google to send people to the site, and then get paid through ContextWeb. If I could pay Google the same amount to send 1000 people to my site as I receive from ContextWeb for 1000 views then I would come out ahead because I would use my credit card for purchasing ads and therefore receive miles or points through the card’s rewards program.

Almost Perfect

If the idea I outlined above were to work, it would conceivably meet all of the requirements of a perfect PPM:

  1. Initial Setup: Sure it takes a bit of work to setup a web site initially, but depending on the site, it might not take much work to keep it up to date over time.
  2. Hundreds of Thousands of Points: With this PPM, if one were to pay $10,000 per month in advertising and receive back the same amount, then one would break even financially, but would also collect 240,000 Membership Rewards points over the course of a year using the Amex Gold Business card
  3. No Harm: With this scheme, everyone comes out ahead: Google gets lots of your money, web surfers get to visit your awesome web site, advertisers get real people viewing their ads, and the credit card company profits big time through transaction fees. Best of all, you get hundreds of thousands of points!
  4. Do Some Good: I think of this as an important, but optional, aspect of a perfect PPM. There are a few ways one could take this idea and do some good with it. One way is if the web site itself is somehow geared towards helping people. It might help connect people to the best charities, give people valuable health information, etc. Another option is that if the site starts earning more money than is spent on advertising, one could pledge to donate that money to charity.

There is really only one barrier to this being a Perfect PPM: It doesn’t work.

The Experiment

I built a website called BestTravelHacks.com using the free Google site BlogSpot. On the site I simply listed my favorite current travel hacks and categorized them into topics: Earning Miles, Using Miles, Cheap Travel, and Improved Travel. Each hack is described briefly and then there is a link to a blog post (often by other bloggers) that goes into more depth. I signed up for both Google Adwords (for buying Google search result ads) and ContextWeb (for getting paid for ads on my site). After signing up for each of these services, I quickly saw the flaw in my plan. I had to pay Google Adwords almost a dollar per click, whereas I would get from ContextWeb about a dollar for every thousand page views. In other words, for every 1000 dollars spent on Adwords I would collect a dollar or two. Not good! Theoretically, I could raise my asking price on ContextWeb, but then ContextWeb advertisers would be less willing to buy the ad space. Alternatively, I could lower the maximum price I would pay on Adwords, but the lower I went, the less prominent my ad would become in Google search results, and fewer people would click through to my site.

In the end, I learned a lot, but I did not end up with a working PPM.

An Alternative

I still like the idea of spending money on ads as a way of fueling a PPM. If you own a business, it might be possible to pull this off like this:

  1. Use a starting budget for advertising, and use that budget to advertise your business via Adwords (or any other service that accepts credit cards). If you are new to Adwords, you can use this link to sign up for $75 of advertising credit.
  2. Over the course of a month, measure the incremental profit gained by your business from the ads. Depending on your business, it might be possible to track this directly. Otherwise you will have to estimate based on prior months’ profits.
  3. If the incremental profit is equal to or greater than the amount you spent on advertising, then you’re golden, and you can increment your advertising budget each month until you see diminishing returns. If the incremental profit is smaller than your advertising spend, you have a few options:
    1. Consider whether your business needs longer lead times to see profit increases
    2. Consider redesigning the ads to make them more effective
    3. If all else fails, give up on this PPM

Thoughts?

What do you think? Is advertising a path toward the perfect perpetual point machine? Please comment below.


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