A Buck A Night

Here’s some simple math to help you determine how much you should cap the payment for links.

First, you’ll need to just let your campaign run for a few days to determine a conversion factor. Conversion factors depend on a lot of things, and are beyond the scope of this post. But for this math, you just need to know “100 people came to my site and 3 people bought my product.” That’s a three percent conversion. Just take the number of people that bought, divide by the number of people who came, and multiply by 100. So if 75 people come through and 25 people bought it, ( 25/75 )x100 = about 33 percent conversion (that’s excellent, most average around 4 to 8, more or less.

This means that if your adwords CPC says you’ll be paying $1.00 per click, divide 100 by the amount you’ll be made per sale. That’s the conversion rate you;ll need to aim at. 100/25=4, great! 100/4=25; you’ll need an amazing conversion rate.

So let’s say 4 people bought your affiliate’s product. For each sale, you earn 12 dollars. You can think that you had 48 dollars worth of income for 100 people ( 4×12). On the other hand, you’ll want to check your CPC (cost per click). If your CPC is $0.23, then those 100 people cost you $23. 48-23=25; you’re 25 in the black. Great! If your CPC is $1.02, that $48 bucks cost $102; you;re 54 bucks in the red. Too bad. Try again; you need to either get your conversion rates up or your CPC down. Unless you like losing money.

So basically, your conversion percentage multiplied by your income per sale needs to be more than the cost for 100 clicks. I find it easier to consider without that pesky decimal place, so I just do the math in pennies.