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# Where's the money? Newbie doesn't get it.

## affiliate commission ROI

#### keyon

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

#### New User

joined:Feb 3, 2005
posts:30

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

#### PeteM

6:22 pm on Feb 3, 2005 (gmt 0)

#### Full Member

joined:Mar 16, 2004
posts:283

Your calculations are correct however your assumptions are not always true. That's where the skill lies, finding products with:

a) decent commission
b) high conversion rates (ad copy helps here reduce bad clicks).

Someone else might give you more clues but I'm not going to!

Good luck.

Pete

#### archie goodwin

6:29 pm on Feb 3, 2005 (gmt 0)

#### Junior Member

joined:Oct 2, 2003
posts:81

I'd suggest trying those numbers with lower avg CPCs. It all depends on the program; but many people bid less than .10 and still get traffic.

#### IntegraGsrBalla

6:34 pm on Feb 3, 2005 (gmt 0)

#### Junior Member

joined:Apr 15, 2004
posts:112

Yes there are many people that are bidding 5-10 cents a click and recieving about \$30+ per conversion.

Ive seen \$50.00+ commissions @ .05 per click.

#### Pirate

7:01 pm on Feb 3, 2005 (gmt 0)

#### New User

joined:Nov 10, 2004
posts:23

profit per customer x conversionrate > max-CPC

If you make 10 USD per customer and you have a CVR of 1.5 % you may spend up to .14 USD per click to make a profit and .15 USD to break even.

#### keywordguru

7:47 pm on Feb 3, 2005 (gmt 0)

#### Full Member

joined:July 13, 2004
posts:269

The good old saying, don't knock it till you try it.

The best way is to find something to promote, build a list of keywords, start a campaign, and try to make a sale.

Track Track Track!

Set a small daily budget, and invest at least \$10 bucks, even \$20. Then see how it goes from there.
KG

#### Fischerle

7:54 pm on Feb 3, 2005 (gmt 0)

#### Junior Member

joined:Apr 30, 2004
posts:50

The landscape is vastly different now than it was a month ago, since only one ad will show for each domain. The highest converting keywords and phrases are going to be jealously guarded by the incumbents, so the price of entry is a lot higher. Your time is probably better served building a content-rich web site.

#### keyon

8:07 pm on Feb 3, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

Thanks everyone for your input...
It's encouraging to hear that some of you are making money on ads under \$.025 CPC. Obviously this changes my ROI equation.

I guess the big question is what constitutes a "decent" commission? And are any of you really seeing conversion rates significantly above 2 percent?

And is the Google AdWord game mostly about high-ticket items? Like \$500 and up?

Questions, questions. Thanks

#### keyon

8:11 pm on Feb 3, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

Fischerle:

When you say my time would be better spent building a content-rich website, are you talking about focusing my efforts on SERPs rather than the paid ads?

#### too much information

8:19 pm on Feb 3, 2005 (gmt 0)

#### Senior Member

joined:June 16, 2003
posts:899

I don't quite get the affiliate thing either.

I tried the content links, matched my affiliate links and products to the content on my site, had good traffic and nothing from the affiliate links.

Do people really buy after hitting affiliate links? or is the trick to skip the content altogether and use AdWords to pass the buyer directly to the item?

#### keyon

8:45 pm on Feb 3, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

too much information:

I think the direct-to-merchant model is sort of a topic in itself---and as Fischerle mentioned, the landscape for this type of business has changed dramatically with Google's new Adwords rules.

Besides, I imagine I'd rather try my hand at building my own content sites anyway, where I could have more control of the look and feel of landing pages.

#### tsinoy

8:31 am on Feb 4, 2005 (gmt 0)

#### Full Member

joined:Sept 10, 2004
posts:321

well I feel like posting some ideas here... so here goes..

well I'm not an expert.. but I think here are some ideas that might work... if you are a beginner.

first, using cj as an example, I use cj because you know if they have a green bar or \$ amounts it means their website converts...

second, if it converts try to look at the merchant's specific product see which one converts really well... I would recommend that you don't go for the top ones.. simply because there's probably a few dozen others promoting it, making it a little expensive to try.. but you can still do it if you want.

third, while looking for the second best or third best products, see if they give you high commission rate, if it's \$10, your max bid should only be 5 cents so 100clicks 1 sale, 100% ROI... if commission is \$20, your max bid can be 10 cents, so again 100clicks 1 sale still 100% ROI.. but I would typically go for products that sell under 50 clicks.. that's something you can grow well.. if it takes 110 clicks to sell one and you get only 20% roi.. I think those in my mind should probably be cut.. spend time on high converting products..

fourth, check if the keywords related to the product have a lot of competition, if it's very few and there is good traffic, that's a good start. but if you see a a very high traffic, be careful, you might get burned.. anyways you can use google or overture's traffic estimators.

fifth, then write a compelling ad, value, value and value for the customer... then set your daily max to at least double cost of 100 clicks... or 1.5x is probably ok... so it won't slow down...

try to avoid ppcing to sites like amazon(in general those with short cookies and big names)... because there's a lot of people that don't buy the first time... you lose those... if you can create your own brand in this case your own website the better.. so if people comeback they comeback to your site and if they buy, you can always refresh the cookie that will give you the commissions.

anyways, here's a quick number for you it's not that good but you know... at least it works... one of my campaigns sold 4 items today.. with about 300clicks... and i think around 100% roi... some days.. I'm break even.. but at the end of the month so far I've ended up with a little more than 100% roi..

#### keyon

4:08 pm on Feb 4, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

tsinoy:

I really appreciate your thoughts...I'm fairly new to this, so I'll have to read your post over a few times to make it sink in.

I'm still a little puzzled about the seemingly high commission dollar amounts people mention in this forum. In your example, you mention \$10 commissions. When I look at Amazon's rate schedule (5-7 percent) this tells me that Amazon customers would have to spend somewhere around \$200 for you to make the \$10. Is it fair to say that the Adwords program just isn't cost-effective for products under a certain price point?

And in regard to Ebay, I have to assume it's the registration commission of \$45 (not the rate schedule of \$0.10 - \$0.25 per bid) that inspires anyone to bother joining their affiliate program. Is anyone really making money from \$0.10 commissions? What happens when everyone in the world is registered at Ebay--will the party be over?

#### Widestrides

2:33 am on Feb 5, 2005 (gmt 0)

#### Junior Member

joined:Apr 23, 2003
posts:158

I've been scratching out some income with AdWords Max. CPC of 5-10 cents and a commission of about 10% and a product line from about \$25 to \$1000.

You are right, it is not easy and not a slam dunk. Finding the right merchant, commission, bid price, product line, and ad copy is key. Many will not work. I've hit on one very good one, but bailed out on a few others that just didn't make it due to too low commissions, too much competition or too low conversion rate.

I think it is safe to say you won't make it trying to sell books with Amazon or iPods with Apple or MP3 players or digital cameras. Find a niche - if there are any left.

#### cagey1

6:44 am on Feb 5, 2005 (gmt 0)

#### Full Member

joined:July 17, 2002
posts:205

Advertising affiliate links with Adwords should only be legal in Las Vegas and Monte Carlo.

It's just like gambling except its easier to lose your money.

#### IntegraGsrBalla

10:47 am on Feb 5, 2005 (gmt 0)

#### Junior Member

joined:Apr 15, 2004
posts:112

Its not a gamble if you know what your doing.

#### christh

12:40 pm on Feb 5, 2005 (gmt 0)

#### Junior Member

joined:Dec 31, 2004
posts:48

Once you've found a group of good merchants that convert, it's not a gamble at all. It's just a matter of getting enough clicks at a low enough price. Stress the importance of having more than one good merchant - I rocked on home with a single merchant during November - picking up a prize for generating the most sales that month in fact - then after that they pretty much died on their arse. They were a seasonal merchant, Autumn being their best time of the year, so I had to scramble to find another good merchant to promote after sales from them dried up in December.

So keep looking for new merchants, nothing is forever as they say... And as somebody said earlier on in the thread, the CJ EPCs and green bars for merchants are a very good indicator of who to try promoting. Although these figures can be massaged; you do get a good idea of who to AVOID at least, such as the \$0.80 EPC non-converting bozos.

#### keyon

2:20 pm on Feb 5, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

I'm not seeing any comments to my earlier question about Ebay---is this something people don't like to talk about?

>>>>>>
And in regard to Ebay, I have to assume it's the registration commission of \$45 (not the rate schedule of \$0.10 - \$0.25 per bid) that inspires anyone to bother joining their affiliate program. Is anyone really making money from \$0.10 commissions? What happens when everyone in the world is registered at Ebay--will the party be over?
>>>>>>>

#### keyon

2:39 pm on Feb 5, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

christh:
I've just started poking around on the Commission Junction site. Don't know much about CJ yet, and I have no idea what kind of transaction fees I would be paying. Guess my first thought is that I'm a little hesitant to add yet more expense to my equation without being more confident about the ROI with Adwords.

The CJ tools you mentioned sound helpful, though.

#### inasisi

3:02 pm on Feb 5, 2005 (gmt 0)

#### Full Member

joined:Dec 8, 2004
posts:338

And in regard to Ebay, I have to assume it's the registration commission of \$45 (not the rate schedule of \$0.10 - \$0.25 per bid) that inspires anyone to bother joining their affiliate program. Is anyone really making money from \$0.10 commissions? What happens when everyone in the world is registered at Ebay--will the party be over?

I don't think there is really anyone who will target the \$0.10-\$0.25 per bid. But the registration commission of \$45 is also only if you got 7500 registrants per month. So eBay has really become a volume game. After this new Google affiliate policy, it is the high volume players who bid high and have taken up the sole spot for eBay making it much tougher for the smaller players.

#### christh

3:09 pm on Feb 5, 2005 (gmt 0)

#### Junior Member

joined:Dec 31, 2004
posts:48

Keyon, CJ is a collection of merchants, with which you can advertise with - they have Ebay on their books. If you want to be frugal, set up an adwords campaign and send a merchant 100 clicks, and see if you've made any profit there. If not, try another merchant. If you're paying \$0.05 per click then you're only 5 bucks down if it doesn't work out.

You've got to speculate to accumulate on Adwords... at least when starting a campaign.

#### keyon

4:33 pm on Feb 5, 2005 (gmt 0)

#### New User

joined:Feb 3, 2005
posts:30

inasisi,
Thanks. I'm looking at Ebay's registration tier, and oh my world, that is a high-volume game. If I think about my original example where I'm assuming no more than 2% conversions, that \$45 payment (the 7500 tier)could only come to me after driving some 375k clicks to Ebay within one month.

The payoff at top tier sure looks attractive (\$337k/month), but way out of my league. That must have been one crazy, intense market before Google pulled the plug last month.

#### MovingOnUp

5:07 pm on Feb 5, 2005 (gmt 0)

#### Preferred Member

joined:June 9, 2004
posts:421

Keyon: Your example shows exactly why this could work. From your calculations, 375,000 clicks could earn you \$337,000. That's almost \$0.90 per click. If you pay an average of \$0.50 per click, you make \$150,000. No wonder there are so many Ebay.com ads on AdWords.

#### inasisi

8:36 pm on Feb 5, 2005 (gmt 0)

#### Full Member

joined:Dec 8, 2004
posts:338

Few things to note if you still want to direct adword to eBay. Given the fact that almost everyone has an ebay id, I doubt whether 2% conversion rate would work. Second if you can bid 50 cents for a click so can these high volume competitors. So the ROI will be cut down in these cases of high competition. Third these competitors start from a point of advantage, they know which keywords and which creatives work. So you might have to burn a lot of cash to learn those tricks for such high volumes. So I would think it might be better to go attack some niche within ebay, instead of getting into the volume game except if you have lots of cash and a strong strategy to better these big guys.

Here are some of the discussions within WW on ebay.

[webmasterworld.com...]
[webmasterworld.com...]
[webmasterworld.com...]

I am not sure that the direction in which this thread is going, that it is more relevant in the Affiliate forum.

#### MovingOnUp

3:26 am on Feb 6, 2005 (gmt 0)

#### Preferred Member

joined:June 9, 2004
posts:421

Excellent points. Looking at their network-wide EPC, it's around \$5. That means that the average affiliate is earning \$0.05 per click through to Ebay. Obviously the conversion ratios aren't as good as the 2% estimate.

#### fclark

5:09 am on Feb 6, 2005 (gmt 0)

#### Full Member

joined:Apr 18, 2004
posts:223

keyon,

\$10 or even \$100 commissions are avail through CJ, but not for selling products. These are found in lead gen programs (financial, edu, etc).

Problem is none of these will accept a white bar affiliate. You need to generate some commission first for a few months with the lower paying programs (possibly at a break-even or loss) to earn your way into the better programs.

#### anallawalla

11:58 am on Feb 6, 2005 (gmt 0)

#### Moderator from AU

joined:Mar 3, 2003
posts:3759

When I look at Amazon's rate schedule (5-7 percent) this tells me that Amazon customers would have to spend somewhere around \$200 for you to make the \$10. Is it fair to say that the Adwords program just isn't cost-effective for products under a certain price point?

Amazon sells a lot of items other than books and they sell for hundreds, sometimes thousands of dollars. Do your research and work out who would buy these expensive items over the Internet. Target them.

#### christh

1:05 pm on Feb 6, 2005 (gmt 0)

#### Junior Member

joined:Dec 31, 2004
posts:48

Fclark, that's just not true. There are plenty of products that people will spend \$100+ on, and there's plenty of programs that offer 10%+ on product sales.

Lead generation is where the big bucks lie sure, but to play with the big boys you have to be prepared to pay big bucks chasing them.

#### MovingOnUp

2:32 pm on Feb 6, 2005 (gmt 0)

#### Preferred Member

joined:June 9, 2004
posts:421

Lead generation is where the big bucks lie sure, but to play with the big boys you have to be prepared to pay big bucks chasing them.

There's big bucks in pay per sale, too. Virtually everything I do is pay per sale. I find it much easier to find people looking for a specific product than to find people willing to fill out a form, apply for a credit card, etc.

#### fclark

4:29 pm on Feb 6, 2005 (gmt 0)

#### Full Member

joined:Apr 18, 2004
posts:223

christh, yep... I may have overgeneralized a bit.

MovingOnUp, my best program is pay per sale, but not through CJ. Pays 30%. Encouraging to hear that you have found it easy to generate product-based traffic.

Point is for keyon: there are high commission programs. Expand your search beyong fixed percent commission to different payment structures.

Main point: you don't get into the best programs from the start. Be prepared to establish a sales history on CJ first, perhaps at a loss.

I found it easiest to do this with a high volume, low payout program (for example earning 50 cents to \$1 per action, EPC near \$5 but I could send hundreds of clicks each day through Adwords) -- something that lets you generate \$30 to \$50 per day in commissions. Keep it steady for a couple months to get some green bars. Then approach the higher EPC programs.

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