Handsome Logic

Affiliate marketing arbitrage is a very professional-sounding term for running a profitable paid search campaign that uses affiliate marketing as the conversion goal.

Example: Bidding on college scholarship keywords and sending the traffic to a landing page that converts with a sign-up for a scholarship information package. If the conversion pays out $3.00 (like FastWeb on Neverblue), you simply have to get your CPC and conversion rate to a level where your earnings per click are greater than your CPC.

The reasons everybody hasn’t quit their jobs to do this are the same reasons everybody didn’t quit their jobs last year to sell products on eBay. We shall call this…

The eBay Conundrum

Infomercials sell eBay to the unsuspecting millions as the easy money answer of the ages. Level playing field, low cost of entry, millions to be made. But on eBay, products often sell for far less than the average person can buy them for at any retail outfit, on-or-offline. How are you supposed to make a profit in an environment like that?

Similarly, in affiliate marketing, high-payout offers are most often in industries where keywords are very expensive.

A payout of $37.50/sale is no small chunk of change.

However, this payout is made less attractive when AdWords Estimator puts the low end of generic debt consolidation keywords at somewhere between $12-16 per click.

If you can convert every single click, you’ll be rich and you simply must share your secret with me.

So where is the money made?

The people making their livings on eBay aren’t buying products for resale from their local electronics superstore and paying full mark-up. The people making money from this debt consolidation offer aren’t paying $16/click for a broad match on “consolidate debt”.

Shoemoney once remarked that “aol.com” was one of his best performing keywords… for a ringtones offer. The point is that “aol.com” cost pennies to bid on, and ringtones (at $12-15/lead) are an offer with enough mass appeal to actually convert with such general traffic.

Kirsty McCubbin talks about single campaigns containing 90,000 keywords. I defy you to think up 90,000 generic terms for debt consolidation. Even if you’re not from the UK. (I can’t make fun of Kirsty for having an accent because I’m from New Jersey and nobody can understand me anyway.)

The newbie affiliate marketer must also learn not to take metrics at face value, as they are often deceiving.

The eBay instant millionaire sales pitch pages will tell you about the “2,000,000 buyers” currently registered on eBay. What they don’t tell you is how many purchases (if any) these buyers make, what they’re buying and from whom they are buying it.

Let’s look again at that $37.50/sale offer on Neverblue…

The green bar you see is “Network Earnings”, pretty self-explanatory. The column after that shows the EPC, which for this offer is $0.18. This means that, on average, clicks on this offer are worth 18 cents each. Can you buy traffic for this offer for less than $0.18/click?

Before you roll up the last ebook you bought on Warrior Forum and commit seppuku with it, let’s look at how that number was decided.

The EPC is a network-wide average computed by dividing the CPA ($37.50) by the average number of clicks required to produce a conversion. Now, this is an offer that permits not only paid search, but also offers banners, email templates and other methods of driving traffic. The EPC is not exclusive to paid search folks. Figured into this EPC are paid search marketers, people putting banners on sites, email marketers, and plenty of other ways (hat color aside) of driving traffic.

It also does not discriminate against failed campaigns. What does this mean? This means that the guy who lost his shirt paying for 5,000 clicks with nothing to show for it is included in the EPC. Every test that has been run on this campaign, every experimental group of keywords, every email list… all part of that number.

Tip: Ask your Neverblue or other affiliate marketing network rep if their in-house team did a test-run of a campaign, and what their EPC was.

Stay tuned for Why Most Affiliate Marketing Arbitrage Newbies Fail - Part 2, where I’ll be discussing the value of account history, the dangers of bad advice and how to set yourself up for success by spending your money wisely.