Google Adwords and Affiliates

You've probably seen the small advertisements displayed to the right hand side of Google search results. Many of these adverts are placed by Affiliates. When someone clicks on one of them, the advertiser (the Affiliate) is charged a fee. The maximum fee per click is determined in advance by the affiliate. The affiliate also controls the maximum daily advertising budget.

For non-competitive keywords, the cost per click is only a few cents - twenty or more clicks can cost less than $1. For competitive keywords, to display on the first page is expensive. The cost per single click can be several dollars. For the keywords 'auto insurance', for example, it can cost over $7.

When we consider the following scenario, simplified for illustrative purposes, it can be seen that this cost is not sustainable for an affiliate. If we pursue our auto insurance example, let us imagine that we have just one affiliate link on our website. And we know that a typical conversion rate for this link is 1 in 40. That means that on average, for every 40 clicks on that link, we will receive one commission for a completed sale. If that commission is $40, on average, we will make $1 per click on our affiliate link.

If the proportion of site visitors that click onto the affiliate link is around 50% (a fairly typical figure) then the maximum we can spend on a single click for pay per click advertising to avoid a loss is 50 cents. Of course, if we want to make a profit and cover our business costs, a figure closer to half this cost is more realistic.

What this means in practice is that when using pay per click (ppc) advertising, less competitive keywords need to be selected to keep costs down. This means that you need to apply a niche marketing model. The Google Adwords service will suggest potential keywords for you which you can select from a list.

Google provides the advertiser with full statistics of each ad campaign which you can access at any time online. It is also possible to determine which links have led to completed sales. You can have 25 ad campaign groups running at once. Each campaign group can include several products.

From the above, it can be seen that it is important for affiliates to always do their sums before embarking on an advertising campaign as the best keywords, for affiliates, are always too expensive. This remains the case for other search engine paid advertising, indeed MSN's live search is often more expensive than Google.

Is it worth using ppc at all then? Yes, but you need to limit your campaigns to the less popular keywords which limits the amount of traffic you can generate for your site from paid advertising. Unfortunately, this means that in practice, for a successful affiliate, typically ppc referred traffic to their site is responsible for only a limited percentage of their overall income. One of the reasons why the affiliate is not able to harnass ppc to great effect is that, as part of their affiliate terms and conditions, they are not allowed to bid on their affiliated brands. They cannot use ppc keywords that include the brand name or related marketing terms as this would put them in direct competiton with that brand. A few affiliate networks (a noteable example is Clickbank) do allow brand bidding and this renders ppc a much more potent income generator.

KEYPOINT:
Pay per click (ppc) is most effective where brand bidding is allowed.

You can find out more about combining Google Adwords and Clickbank.

Good luck with your campaigns.