Affiliates. What You Need to Know to Make a Success of Google Adwords and PPC...

One More Example of an Unrealistic Claim ...

You might prefer to read this article about the vital importance of minimising clicks before reading this paper.

I don't know if you've noticed or not but in the last 3 months or so there has been an increase in the "make a fortune in 1 month" offers popping up across the internet. Here's the headline from the latest one I got this morning...

"Confidential Report: for the first time ever...
“Shadow Affiliate Triad Reveals $247,000 a Month Portfolio of Cash Siphoning Tactics You were Never Meant to See...” Are You Ready for a Quick Raid on the Internet’s Biggest Hidden Cash Mountain?"

Most of these "secrets" relate to making money from affiliate schemes in one way or another. This is typical of a hard sell offer providing the apparent answer to everybody's prayers.

Here's How to Evaluate an Affiliate Scheme..

It is very difficult for the vast majority of new affiliates to make any significant amount of money from most normal affiliate schemes. Note that I said virtually since some people are making small fortunes.

Successful affiliate schemes from the merchant's perspective depend upon 2 factors ... thousands of small affiliates making occasional sales and a few "super affiliates" who make large volumes of sales. Many super affiliates make more online sales than the merchant itself. These Super affiliates recruit other affiliates further entrenching their position.

Super affiliates have been around a long time, get very favourable commissions and get favourable treatment from the merchants they represent. The vast majority of affiliates do not know these benefits exist let alone get access to the benefits. I will allude to these later.

The Super Affiliates also have very extensive email lists as well as a large network of merchants and they tend to focus on repetitive sales (eg consumables, recurring charges, back end sales and so on). In addition and where it makes economic sense to do so they are capable of creating very large database driven websites targeted to specific product ranges using merchant feeds and to do this within hours using basic computer skills. They do this using special software and a combination of skills developed over the years they have been involved in selling online. No programming expertise is required
The fact that super affiliates are successful has much to do with the fact they have been online a long time and have managed to build up very large lists. They have also probably built up a formidable number of websites created in order to:

(1). Maximise free traffic through SEO and

(2) Maximise PROFITABLE paid traffic through PPC.

The SEO websites were probably built when it was easy to get free front page listing on the important search engines or the super affiliate has bought an under-developed website from people who have built up a good history.
It is now almost impossible for the normal person with average resources to get free front pages listings in Google (70% of all searches) in a competitive market. It remains possible to get these front page positions for what are known as long tail keywords (3 and 4 word phrases) but traffic resulting from these is generally small in volume. The actual cost (in terms of time) to create content websites for free listing purposes is extremely high. Most people discount the cost of time.

It is these super affiliates that make the real money online and they don't broadcast this very much let alone give away their secrets.

The Reason Why Making Money is So Difficult and the Reason Why Most "Get Rich Quick Schemes" Just Cannot Work.

It's important to understand the maths behind making money on the internet.

There are 5 vitally important variables that need to be assessed in deciding whether an affiliate scheme can work or not. Paying attention to these variables before plunging into an affiliate opportunity will save a lot of time, money and frustration. In the discussion that follows I am referring to traffic through paid search since the cost of this traffic can be quantified easily. When it comes to non PPC (ie SEO websites) the cost is hard to quantify but make no bones about it the cost is high in terms of time.

1. The value of the affiliate commission, earnings or payout (COMM).. is it fixed, a % of sales or a payout per lead generated? The higher the money value of the payout the better.
2. The conversion rate (CR) that the merchant's site makes ... ie for every 100 visitors the affiliate sends to the merchant's site how many convert to a sale. This number can vary a great deal from as little 0.5% to 25% or more. This number is highly significant and more is obviously better.
3. If the affiliate is using PPC the click through rate (CTR1) to the landing page (or merchant site directly if this is made possible by the merchant) and Cost per Click CPC). Across a range of keywords a CTR of only 1% or less is not uncommon especially in competitive markets.
4. The Click Through Rate from the landing page to the merchant site (CTR2)
5. The volume of traffic referred to as Impressions (IMP). If volume is low then profit potential is also low.

All these variables actually work together in a very defined relationship which you need to understand. This is best explained using an example.

Start with the Conversion Rate and Work Backwards...

Assume value of a sale is R100

If conversion rate = 5% then it takes 20 clicks to make a sale.

If there is no landing page between Adwords and merchant site then 20 clicks from Adwords is required to make 1 sale. This is a vital factor

The breakeven CPC is then R100/20 = R5

If there is a landing page between Adwords and the merchant page then there is another conversion step. Let's say the click through rate from landing page to merchant site is 10%. This means that 200 clicks are required from Adwords to make the single sale... 200*0.1*.05 = 1.0

The breakeven CPC in this case is then R100/200 = R0.50.

If the CTR from Adwords was 5% then 4000 impressions are required to make 1 sale... 4000*0.05*0.1*0.05 = 1

Cost per 1,000 impressions to break even = R25.00

The Problem with Competitive Markets

How do you know if a market is competitive?

Just count the number of advertisers when you do a search. The more ads you see the more competitors and the higher the money to be made in the market by those who know how to manipulate the numbers (super affiliates) and are able to work closely with the merchant.

Let's take an extreme example of Car Insurance in South Africa where the click must first go to a landing page as is required by Google Adwords rules.

The participating insurance companies normally pay a commission based upon a lead or more ideally a percent of the annual premium. Let's say this commission rate is 12% of the annual premium.

A well run affiliate scheme with good customer service (Dial Direct is a very good example) will convert about 20% of leads to a sale and provide a commission of between R700 - R900 per lead converted.

To get on the front page of Google for the volume keywords like "car insurance quote" a single click costs R110 on November 16th 2008. Such a CPC in position 10 or 11 will get you at best a CTR of 1% probably more like 0.5%

Now lets run the above example again using Rands in this case... and this is a very realistic scenario based upon a South African affiliate scheme in a very expensive and competitive market...

Assume value of a sale is R900

If conversion rate = 20% then it takes 5 clicks to make a sale.

If there is no landing page between Adwords and merchant site then 5 clicks from Adwords is required to make 1 sale.

The breakeven CPC is then R900/5 = R180. This is enough to get on front page of Google

If there is a landing page between Adwords and the merchant page then there is another conversion step. Let's say the click through rate from landing page to merchant site is 5%. This means that 100 clicks are required from Adwords to make the single sale... 100*0.05*.20 = 1.0

The breakeven CPC in this case is then R900/100 = R9.00

If the CTR from Adwords was 1% then 10,000 impressions are required to make 1 sale... 10,000*0.01*0.05*0.20 = 1

Cost per 1,000 impressions to break even = R90.00

For this kind of campaign R9 per click will not get you onto the front page of Google so the chance of any worthwhile traffic is low.

Always be aware that in very competitive markets most normal affiliates will be competing with the merchant itself (Dial Direct could be similar to the example above) and the super affiliates (there are 3 or 4). The merchant is at a considerable advantage because no landing page required and the margin on a sale is much higher. In addition the merchant normally prohibits the affiliate from bidding on the company name or brand name thus making the CPC on the brand name much cheaper. In these high competition market bidding on the brand name is critical. STOP PRESS ... Google has now forbidden the use of the Dial Direct brand name in any ads. This leaves the market wide open for Dial Direct to make massive profits from very low click costs.

Factors like the above make the PPC challenges to a normal affiliate almost insurmountable in competitive markets.

Examples of calculations... you can get this Excel calculator by clicking here.

So how on earth do these affiliates make money... and they do?

The answers lie in the following..

1. Getting the commission up (it is possible to get up to double and even more the normal rate but this needs a long period of successful campaigning or an excellent track record to get) AND
2. Cutting out the landing page. This not allowed by Google's rules. However it can be achieved indirectly using other methods well known to super affiliates and almost completely unknown to the vast majority of ordinary affiliates. This work around is allowed by Google.
3. Increasing the PPC click through rate by getting a higher position in the search results ... and not necessarily by paying more for a click.
4. Using more than a single website to crowd out competition.
5. Knowing how to structure and manage PPC campaigns and having a good click history with Google

Focusing only on one of the above is not normally enough to make a campaign in highly competitive markets profitable

It goes without saying that running a campaign without focusing on all the above variables will almost certainly mean you will lose money. The difficult number to get is the actual conversion rate relevant to your own campaign and not a rate sourced from a conglomeration of all sources. The "average" information is published in many affiliate programs as the Earnings per 100 Clicks (EPC).

Individual campaign information is made available to super affiliates on a real time basis. Quite frankly unless this conversion number can be accessed it is probably wise not to become involved in the program where clicks are generated using PPC. My experience of affiliate programs is that the EPC is overstated and unreliable for use in PPC calculations.

Now You Know to Be Careful of Get Rich Quick Affiliate Schemes.

You should be able to see, if you have followed the above calculations, that it is probably IMPOSSIBLE to get rich quick using affiliate programs. In fact using PPC is a way to get poor quickly unless you know how to run a successful Google Adwords campaign.

Before you even think of running an affiliate programme run the numbers through the above simple calculation and get a measure of what might be possible using PPC and or "free" search. But place a value on the required time to get free search results.

The above principles apply as much to a real life ecommerce site as well as an affiliate program. The difference normally is the higher payout per sale which is significantly higher than a commission and the ability to click through to the merchant site.

The Only Way for Affiliates to Profit from PPC

In summary to stand the remotest chance of making money on the internet extremely close attention has to be paid to traffic volumes, click through rates at a number of points, the profit margin per conversion and the cost of a click be this using PPC or the free search (SEO) approach.

It is not easy to make a profit online. However not only is it possible it is highly probable by optimising many variables and by educating yourself in methods and techniques to make significant profits from PPC.

The best example where affiliates make money is in the Clickbank marketplace. Here it's possible to make large sums of money but only by doing it "the right way". Only the Super Affiliates do it this way. I will be showing exactly how to harness the power of Clickbank in the upcoming workshop since the technique is directly applicable to the systems and tools I will be disclosing.

What Do You Think? I Would Appreciate Your Feedback

I used to run SEO workshops publicly and privately until about 2 years ago when I became too busy doing other things. It also became true that what worked well in terms of SEO up to 2 or 3 years ago started to become considerably less effective and as such the customer value I could create diminished to the point where I didn't want to continue. Since then I have focused my efforts strongly on running PPC campaigns for my own ecommerce sites and affiliate sites as well as managing campaigns for 3rd parties in a wide variety of markets from accommodation to education. There is no doubt that in future for commercially orientated traffic the PPC route will be the only truly effective means of competing online.

I am considering putting together the following workshop in February next year and would like to receive your feedback on whether you think it would be valuable to yourself or company ... size in this case does not matter since Google Adwords allows the one man organisation to compete effectively with the larger corporations.

For Any Serious PPC Participant: The Planned February 2009 Workshop in Broad Outline...

1. The common denominators to succeeding on the internet... get these wrong and most of your efforts will fail no matter what else you do
2. Important basic SEO requirements and check list for any website ... absolutely essential ingredients for any website yet very easily implemented within a day and why you don't need an SEO expert like myself.
3. How to set up and manage successful Google Adwords campaigns for local, international, multinational, ecommerce, affiliate and lead generation strategies... it is believed over 99% of Google Adword campaigns are set up the wrong way much to the advantage of Google. Do it the right way and dramatically improve profitability... get the CTR's up, reduce the CPC's and increase the impressions.
4. How to dramatically increase the effectiveness of any PPC campaign by increasing the conversion to sales ratio. Do this and you will turn a losing campaign into a winning one.
5. Affiliate marketing opportunities and pitfalls for both merchants and affiliates
6. How to create highly targeted large dynamic or basic HTML websites in less than a day, in house, for little cost and with no programming experience necessary. Yes it's true. All you need is basic spreadsheet skills.
7. How to track everything of importance, present it in easy to understand format and thus increase profitability and cut out waste.
8. How to discover the strategies of your online competitors and then beat them at their own game
9. Effective list building for future profits
10. Creating ecommerce sites... easier and cheaper than you think.

I envisage the full day workshop using real life examples will be R5,000 per person which will include a personal 1 hour session with me after the workshop to ensure you benefit quickly and significantly.

During the workshop I will share the tools I use, how to use them and where to get them. This information alone is worth far more than the cost of the workshop.

At the end of the workshop you will be in a position to profit from search traffic in the short, medium and long term. You will know more about succeeding on the web than the vast majority of website owners anywhere in the world and especially in South Africa.

If you think you might be interested (no obligation at this stage) please ring me (Tony Roocroft 011-454-0105) or send me a brief email to gads(at)seoza.com Please include your name and contact details and I will keep you in touch.