There was once a time when you could create a thriving online business just by promoting affiliate links via pay per click and other traffic sources which were, at the time, a lot cheaper than they are now.
Sadly, those days are long gone.
Nowadays you need to do things differently, if you want your affiliate campaigns to put food on the table.
Based on typical conversion rates for targeted visitors hitting an affiliate link, it’s very unlikely that the cost of sending the visitors to your link will not exceed the commissions you earn from an ad campaign where visitors are sent straight to an affiliate link.
Marketing is a science so lets use mathematical logic to illustrate this:
The Mathematical Formula for Affiliate Campaign Profit
Number of Visitors x (EPC – CPC) = Profit
For this to be a positive value your EPC (average earnings per click) must be higher than your CPC (average cost of a click).
Let’s see a realistic example:
Let’s say you buy a solo ad and send 500 visitors to an affiliate link for a product that costs $20 and converts 4% of your visitors to buyers. You receive 50% of the sales you refer as affiliate commissions and therefore receive $10 for every sale you refer.
Your average EPC in this instance is $10 x 0.04 = $0.40
However, real targeted traffic is expensive so you’re going to be paying at least $0.50 for every click on your solo ad.
The profit for this affiliate campaign is therefore:
500 x (0.40 – 0.50) = -$50
That’s a $50 loss.
Nowadays, it’s nearly impossible to achieve a profit by promoting an affiliate link with paid advertising.
Whatever anyone tells you, visitors are costly, and so called ‘free traffic’ generation isn’t free as you have to invest your time.
There is no way around these simple facts.
However, if you collect email leads before you send people to a sales page, the formula changes, favorably….
The Mathematical Formula for Affiliate Campaign Profit with front-end Lead Capture
Number of Visitors x [(LCP Conversion Rate x EPL) – CPC)] = Profit
EPL is your expected earnings per lead from the initial affiliate link click and your subsequent email follow ups, which are sent to give your leads several more opportunities to buy the product via your affiliate link.
Your EPL needs to be high enough to exceed your CPC when your EPL is multiplied by the fraction of your visitors your LCP (lead capture page) converts to leads.
For example, if your lead capture page converts 25% of your visitors into leads, your LCP conversion rate in the above equation would be 0.25 or ¼.
Let’s apply the previous 500 visitor solo ad example but this time with the visitors being sent to a lead capture page with a conversion rate of 25% for this traffic source.
500 x [(0.25 x 2.8) – 0.50] = $100
That’s a $100 profit.
In the above equation I have used an EPL based on 28% of your leads going on to buy your affiliate product at some point during their initial exposure to the product and your subsequent follow up sequence, which I think is a realistic figure.
Statistics have shown that, on average, only 8% of people buy on their 1st exposure to a product.
The example therefore realistically illustrates just how essential it is to collect leads rather than just sending visitors to an affiliate link.
Although the 2nd formula is a bit complicated, the thing you need to actually understand in all this is that list building is essential.
Also, this profit calculation doesn’t take into consideration sales you make from your newly generated list for different affiliate products you promote to them at a later date.
OK, I’m hoping that by now I’ve convinced you that the way to make money with affiliate promotions is with a system that incorporates both email lead capture and several follow up email messages. I’ve been doing affiliate marketing for 10 years and building a list and following up with my leads via email is the only method that has ever worked for me, and I think I’ve tried just about everything else with little to no results.
Here’s a diagram showing each step involved in my affiliate marketing model.