| Before you launch a new pay per click | | | | from your affiliate company is high, you can |
| campaign, you should estimate the | | | | afford a campaign with a low conversion rate. |
| profitability of the campaign. This is easy | | | | On the contrary, if the commission per |
| to do with a few assumptions and simple | | | | transaction from the affiliate company is |
| calculations. | | | | low, and the CPC is high, you need a |
| | | | conversion rate that is high. |
| Pay per click (PPC) advertising has | | | | |
| revolutionized advertising on the Internet. | | | | It is a matter of simple math to project the |
| This allows for very targeted advertising to | | | | results of a sales campaign. |
| Internet users who are searching for the | | | | |
| particular item that is being advertised. | | | | Profit per click = ($ per sale X Conversion |
| Google Adwords and Yahoo Search Marketing are | | | | rate) - (Average cost per click) |
| the two major PPC programs on the Internet | | | | |
| today. Microsoft AdCenter is a recent | | | | Let's plug in some numbers and see how this |
| newcomer to PPC programs. | | | | works. Assume that the selling commission is |
| | | | $5.00, the conversion rate is 5%, and the |
| It is easy to set up an advertising campaign | | | | average cost per click is $.10. Multiply the |
| under one or both of these programs, but one | | | | selling commission ($5.00) by the CR of 5% to |
| must be cautious and make good business | | | | get $.25. Subtract the cost per click (CPC) |
| decisions about the campaign. The intent is | | | | of $.10 from $.25 and you get a profit of |
| to make money rather than pay Google, Yahoo, | | | | $.15. This does not seem like a lot of |
| or AdCenter more than you make. | | | | money, but the Internet is viewed 24/7 so if |
| | | | you have 1000 clicks per month and convert 5% |
| When evaluating the potential profit from a | | | | of them, you will make $150 for setting up |
| PPC program, you will only be charged for the | | | | the campaign and then monitoring it |
| times that the user clicks your ad. However, | | | | occasionally. If you set up several of these |
| there is another variable that you must | | | | campaigns for different key words, you can |
| consider which is called conversion rate | | | | make a nice supplemental income. |
| (CR). This is the number of users who click | | | | |
| the ad divided into the number of users who | | | | In summary, always do your homework and make |
| actually buy the product. A rough rule of | | | | solid assumptions about your campaign. Do |
| thumb for CR is five (5) percent. | | | | the math so you are not surprised by a |
| | | | campaign that costs you money rather than |
| You need to project the economics of the | | | | making you money. |
| campaign before you launch it. If you have a | | | | |
| low cost per click (CPC) and the commission | | | | Copyright 2006 John Howe, Inc. |