Affiliate Marketing Overview Well, this is supposed to be a Thursday update, but it's Friday (you knew that).  The real honest truth is that I fell asleep on the couch last night.  That happens some times.  I made the mistake of watching Burn Notice (I really like that show – and the episode was really good).  Problem is, I never got up.  Television and part-time internet business don't mix very well, but that is a whole other series of blog posts about staying motivated in your internet business.

By the way, if you missed it, you can check out an overview video that I made on YouTube.  I have included it below.

I have also created an Open Niche Project Home Page where we can keep track of our progress.

I thought it would be useful at this stage of the project to visualize the goals for our project.  In other words, when we are done, what do we want to have, and what will it take to get where we want?

In the words of some development guru (Zig Ziglar or Stephen Covey), It's really important that you “begin with the end in mind.”

  • We are trying to build a site that attracts visitors and converts those visitors to buyers of affiliate products.
  • We want our site to reach “phase one success.”  Phase one success is defined by me as $250/month in monthly profit (not revenue).
  • We want to get our traffic from search engines and social media.  We can choose to pay for traffic, and will will do some email marketing (newsletter and auto responder), but our focus will be on ranking in the search engines.

Affiliate Marketing Mathematics

So, how do we make $250 per month on a website?  Let's look at some affiliate marketing math.

Let's say that we can find an offer that pays us in the neighborhood of $20 per sale.  That is actually what Andrew recommends in Unstoppable Affiliate.   If we are going to make $250 per month (ignoring expenses for the moment) then we need to sell 13 items per month.  (13 x $20 = $260).  That is about one sale every 2 days (more or less).

Now, what needs to happen for us to actually sell a product?

This is a question of conversion rates.  A conversion rate is simply the number of visitors that you get versus the number that take the action that you want.  For example, if a visitor visits our site and then clicks on our affiliate link to a product, that is a conversion.  The conversion rate is just the actual number of conversions that occur divided by the number of visitors.  So, if 100 people visit our site and 3 people click our affiliate link (3 people convert), that is a 3% conversion rate.  That's 3/100 = 3%.    Get it?

A Conversion Example

So now that you know what conversions are and what conversion rate is, let's talk about an affiliate product site.  For this example, I am going to just make up some numbers.

In the site that we are imagining, we actually need three big conversion steps to make a sale.

  1. We need a visitor to find us in Google or Bing and click our site in the search results (conversion 1).
  2. Then, we need that visitor to click our affiliate link (conversion 2).
  3. Finally, we need the visitor to buy from the affiliate site (conversion 3).

When the traffic is coming from search, we only get paid if we make all three conversions.  To get the total conversion rate for our sales funnel, we need to multiply theses conversion rates (don't panic about the math, I brought pictures).  In fact, I think a specific example would be good here (we'll keep it simple).

Imaging a search term that gets 2500 searches per day.  We rank number one (good for us).  Conventional wisdom says we could get around 40% of the search traffic for that term.  This is changing some with the integration of social into search, but for now, let's say 40%.  This means that of the 2500 people that typed our search term into Google, 1000 of them (2500 x 40% = 1000) clicked on a link that took them to our site.  Very cool (free traffic is very cool).

Let's talk about those 1000 visitors.  Imagine that our copy is so compelling that 10% of those 1000 visitors click our affiliate link.  That's a 10% conversion rate, and it means that 100 people (1000 x 10% = 100) will visit the affiliate product sales page.

Now, let's say that 20 of those 100 visitors to the affiliate product sales page actually buy the product (that would be a 20% conversion rate).   If that happens to us, then our sales page conversion rate is 20% (and we should celebrate as many people would kill for that rate).

Here is a picture that might help.

Affiliate Marketing Overveiw

Note that your mileage will vary depending on your conversion and traffic numbers.

Affiliate Marketing Overview

So, we started with 2500 people in Google and got 20 sales.

Our overall conversion rate from search to sale is 20/2500 or about 0.8%.  Our site conversion rate is 20/1000 or 2%.

Make sense?

Note that the numbers that make sense here will depend on the quality of your incoming traffic (how targeted is it), the quality of your sales copy, and the quality of the offer sales page.  So your numbers could be anywhere.  You just have to build the site, test and improve from there.

So, for the Open Niche project, we will be shooting for about 2500 visitors per month (about 85 per day) to start, and we will see what happens from there.

Once we have some traffic and some data, we will revisit this model and see how we are doing with respect to our model.

I hope you have enjoyed this affiliate marketing overview.

Got Questions?

I'll bet you have a ton of questions about this post.   Bring 'em!



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