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Where's the money? Newbie doesn't get it.
affiliate commission ROI
keyon




msg:1134865
 5:46 pm on Feb 3, 2005 (gmt 0)

Sorry if I'm being naive, but after browsing this forum (and reading the suggested newbie threads), I'm still puzzled how AdWords advertisers are making reasonable ROI from affiliate commissions.

The average conversion rates I'm familiar with (in just about any given industry) seem to hover between 1-2 percent. When I look at an Adwords equation where I pay $0.25 per click, my numbers (see below) say that I'd need to bring in no less than $25 compensation on every conversion.

Sure, the $45 Ebay registration looks good. But what about all the other affiliate programs that pay 5-10 percent? If my $0.25 link to Amazon pays me only 5 percent commissions, a customer would have to
spend $500 to make it worth my while to run the ad. That doesn't seem likely at Amazon.

Am I missing something here?

Assume 1,000 clicks/day with average CPC of $0.25
1000 x $0.25 = $250 net cost Google AdWords
Apply conversion rate of 2% to this traffic:
1000 x .02 = 20 buyers
Average commission needed to break even:
$250(net cost) / 20 = $12.50
Average commission needed to make a reasonable profit (100% markup)
$12.50 x 2 = $25

 

fclark




msg:1134895
 4:38 pm on Feb 6, 2005 (gmt 0)

christh,

re paying big bucks in lead gen: sometimes true sometimes not. PPC to merchant direct? Definitely expensive.

Even before the Adwords change, I was paying up to $5 per click to generate traffic for some financial lead gen programs... not exactly cheap.

On my very best earner, however, I found a way to pay 5 cents a click in a related subject, send traffic to a small site built around the related subject that introduces the expensive subject and then send traffic to the high payout lead gen program. Cross-selling.

t2427537




msg:1134896
 5:38 pm on Feb 7, 2005 (gmt 0)

Keyon - I wanted to thank you for your post. I'm in the same boat as you and have had some of the same questions. One of the issues I've had is the lag time in reporting from some of the companies I'm advertising for. I'm doing one now for a tax software compnay through linkshare. What drives me crazy is that I've found it hard to make adjustments to the ads or the cpc because when I run reports I might 2 or 4 days with no sales and the click through numbers being way behind what google is reporting. Then all of a sudden 4 or 5 sales will post along with what looks like several days of clicks.

Also you mentioned ebay. Of the campaigns I'm running they seem to be the most consistant and while the 10 cent commision is not making me any money it usually covers that days cost of advertising. Good luck

inasisi




msg:1134897
 10:05 pm on Feb 7, 2005 (gmt 0)

Of the campaigns I'm running they seem to be the most consistant and while the 10 cent commision is not making me any money it usually covers that days cost of advertising. Good luck

Wow. If a 10 cent commission covers the cost, then even if you advertise at the very minimum of 5 cents, one in every 2 persons who clicks on your ad will have to bid or buy on eBay. Is your conversion rate so high?

t2427537




msg:1134898
 10:28 pm on Feb 7, 2005 (gmt 0)

should have said "helps cover the cost" My budget is $5.00 a day and the 80 90 cents keeps the day from being a complete wash out

keyon




msg:1134899
 11:10 pm on Feb 7, 2005 (gmt 0)

Wow was my thought, too....when you put a little algebra into this equation (thanks Pirate, inasisi), that $0.10 Ebay commission does not look good at all for Adwords:

profit per customer x conversion rate > max-CPC

or in other words:

$0.10 x y(given conversion rate)= $.05(max-CPC)
$.05(max-CPC) / $.10(Ebay commisssion) = y
y = 0.50 (50% conversion rate needed to break even)

Potatomani




msg:1134900
 4:43 am on Feb 9, 2005 (gmt 0)

My first post. Okay I need some help. I'm reviewing this site from dialup at the moment. So it's a challange to read everything(so much good stuff).

Here's my question. I recently switched from selling Sirius satellite radios to ink cartridges. The first day I posted(yesterday) an ad I made $15 in 4 clicks. I was paying $2 a click with a budget of $10 a day. So today I raised my budget to $100 a day and $3 a click. So far I only made $20. But the day is still young.

Good idea? Bad idea? Google recommends a $1,000 a day! sheesh! Guess that's a sign the ink market is pretty well saturated. lol

I'm open for any suggestions. lower it raise it...what you would do, wouldn't do...

keyon




msg:1134901
 5:43 am on Feb 9, 2005 (gmt 0)

Potatomani:
$15 in 4 clicks from an ink cartridge ad? Not that I have much practical experience with Adwords, but I'm really having trouble understanding how anyone could be getting:

1) A conversion rate between 25-100 percent?
2) A commission from one cartridge that's at least $3.75?

Is this really happening?

skibum




msg:1134902
 8:00 am on Feb 9, 2005 (gmt 0)

you don't get into the best programs from the start

I'd have to disagree with that too. Lots of merchants have their programs set on auto approval. If you do some product research & know how to market consumer products and have a little creativity you can sell anything online via AdWords as an affiliate and make a nice chunk of change.

MovingOnUp




msg:1134903
 1:10 pm on Feb 9, 2005 (gmt 0)

Here's my question. I recently switched from selling Sirius satellite radios to ink cartridges. The first day I posted(yesterday) an ad I made $15 in 4 clicks. I was paying $2 a click with a budget of $10 a day. So today I raised my budget to $100 a day and $3 a click. So far I only made $20. But the day is still young.

The $15 from 4 clicks was likely a fluke. You need a lot more than 4 clicks to see what kind of conversion ratio and average earnings per click you're going to get. From my experience, the best I've seen with ink merchants is about $1/click. That's from organic traffic, though. Good targeted PPC traffic might do better and there might be better merchants than the ones I'm using, too.

It sounds like you're probably bidding on some very generic terms. Pick some very specific ones instead (part numbers, for instance). You'll probably be able to get a much lower CPC and more traffic for the same amount of money.

you don't get into the best programs from the start

I'd have to disagree with that too. Lots of merchants have their programs set on auto approval.

Skibum is right. Most good merchants are very approachable and either auto-approve or approve quickly. They're anxious to get good affiliates. Now finding the best merchants on the first try might be a different story. I usually try out a bunch of different merchants. Sometimes I'm quite surprised at which ones do the best.

IntegraGsrBalla




msg:1134904
 1:48 pm on Feb 9, 2005 (gmt 0)

I would test out the conversion rate alot more before making a move like that.

The first couple of sales could have just been lucky.

Don't make any big moves unless you are certain what your conversion rate is.

fclark




msg:1134905
 2:46 pm on Feb 9, 2005 (gmt 0)

RE best programs from start:
I'd have to disagree with that too

OK, scan the CJ merchants by EPC, look who is tops and go apply to the $350 EPC mortgage and life insurance programs. Watch them clamor to auto-accept you LOL!

I did not say that there are not any good programs available for beginners. There is a difference between BEST and GOOD.

Potatomani




msg:1134906
 3:20 pm on Feb 9, 2005 (gmt 0)

I really get $15 for 1 sale. I agree..I think it was a fluke. I wish I had of waited before I raised my budget. example.com is who I'm affiliated through. The sale I got was $59.97. My exact commission was $14.99. Beginners luck. The next day I made $20, but spent triple that to get that $20. It's funny. I don't blame you for being skeptical. I was skeptical about this whole thing. I tell my friends about it, and they think it's a "get rich quick scheme".

I liked what I read about that specific keywords. I'm going to try that. The key word I'm using(ink cartridges) is too general and frankly too expensive at the moment from my what I've learned so far.

[edited by: eWhisper at 3:24 pm (utc) on Feb. 9, 2005]
[edit reason] Please Don't Drop URLs [/edit]

fclark




msg:1134907
 3:29 pm on Feb 9, 2005 (gmt 0)

Potatonami,

There have been others who expressed the same thing, and I've had it happen a couple of times... a quick bunch of sales right when the Ad starts and then nothing.

Haven't seen a very good explanation for it yet.

keyon




msg:1134908
 3:38 pm on Feb 9, 2005 (gmt 0)

For newbies following this conversation from the benches--are most of you talking about finding/aquiring merchants via Commission Junction? Some of the posts seem like this is almost a given. If that's the case, where's a good place to learn more about CJ? I'm not seeing a specific forum here titled as such.

If CJ is not a given, then where's a good place to learn about different ways to build affiliate relationships with merchants?

Potatomani




msg:1134909
 3:58 pm on Feb 9, 2005 (gmt 0)

I'm using CJ. I know..that' just wierd. I post it..hit it big..and then flatline! lol...My ad is on life support. ha ha

Frequent




msg:1134910
 4:13 pm on Feb 9, 2005 (gmt 0)

I think that's pretty standard fare with CJ. When I first started using PPC to CJ merchants it happened at least half the time. Great conversions the first week or two then down to a trickle. Personally I suspect less than honest actions on the part of some merchants. Of course it could be ad blindness, but since I typically rotate at least 6 ads for any given ad group I don't think that's the problem.

t2427537




msg:1134911
 6:01 pm on Feb 10, 2005 (gmt 0)

of all the programs I've always found CJ to be the easiest and most accurate one to use. As far as any of the big companies cheating us, I doubt that they have the time or need to do so. On the other hand I doubt that in the grand scheme of things we are thier biggest priority so if something goes wrong and they lose track of who sent them a few hundred or even thousand hits I doubt much effort is spent in tracking things down. I'm running a campaign for a tax software company (through linkshare not CJ) and twice in the last month my conversion rate just didn't look right, so I wrote a email to them asking if they had any idea of what was going on and I asked for specifics on lag time to reporting etc. While I never got response back both times sales magically appeared next time I ran a report and they were listed as manual adjustments.

t2427537




msg:1134912
 6:03 pm on Feb 10, 2005 (gmt 0)

one question about CJ. Do most of you find that the posted epc's are in line with the results you get? If so I'm skewing the curve downward.

MovingOnUp




msg:1134913
 8:58 pm on Feb 10, 2005 (gmt 0)

If you're skewing the line downward, there are others of us who are skewing the line upward.

This 49 message thread spans 2 pages: < < 49 ( 1 [2]
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