Aim to Break Even : A Different Strategy
When most of you set up your affiliate campaigns, the goal is to profit and put money in your pocket. Maybe some of you aim to lose some money in the beginning with high bids and looking for the converting keywords, and then cut the bad keywords and just keep the profitable ones. Both are good strategies with the goal of profiting. The strategy I’m about to describe is one I’m using right now for a niche, and involves breaking even (or commonly losing money) for up to a month or more. Now who would want to do that? If you have enough balls to expect to lose a couple k, the rewards can be worth it.
As read from the guide, if you’re trying to go big in a niche, the eventual goal is to go direct and typically white label the offer. You’ll benefit from much higher payouts and conversion rates. So the goal with this strategy is to bid high (for the premium spots) and get tons of volume, and then with enough sustainable volume go direct. Don’t bid $5.00 to the point where you’re losing 1k/day, bid around where you’re breaking even. For the niche I’m running now, I’m able to bid for the top spots and break even or lose about $100/day. I’ve been working on the niche for about a week and I’m doing about 3-4k/day with it, breaking even. For the next month or so I’ll be working on ramping up the volume even more to 6, 7, or 8k/day still breaking even or losing $500/day instead of $100. But by that point in time, I’ll be doing a ton of leads consistently, and the merchant would be retarded to not want to do direct business with me.
Now it’s time to crunch some numbers. These numbers are just examples and don’t pertain exactly to what I’m running now (although the percentages are very similar).
Right now I’m running offer X through affiliate network Y. I’m doing $5,000/day off of a product that I’m getting $5/lead for. So I’m doing 1,000 leads/day for this product. My conversion rate is great right now, it’s about 20% (my real conversion rate is actually higher), so that’s going well. I’m bidding and losing about $300/day because my bid prices are high. I’m at -$300 profit/day right now.
Now I go direct with the merchant. I start off with an immediate $2.00 payout increase and I’m getting $7.00/lead. I’m able to white label the offer, and that jumps conversions up to 30% instead of 20%. Also because of the white label, it’s time to drop bids down in PPC. So instead of spending $5k/day, I’m able to spend $3.5k/day and keep the same ad position. It’s now super number crunching time. Taking in our new conversion rate, I’m doing 1,500 leads per day at a payout of $7.00 per lead, spending $3,500. That brings my daily profit to $7,000.
As you can see, it’s definitely a strategy to think about. If you have the guts to lose $300/day for a month, you can be rewarded with huge profits. Note that these numbers may be a little exaggerated, but it does give you an idea of how far white labeling and volume can take you.
Certainly not for the feint of heart, but an excellent summary of one way serious affiliates should be approaching the problem. The major players in almost all PPC verticals have higher acquisition costs than the average affiliate is offered.
White labeling will help, but I would be shocked to see it be a 50% increase to conversion. Obviously depends on offer, network etc.
Yeah you’re right, conversion rate probably wouldn’t increase as close to that much, but you would see a nice boost since in some cases you’re cutting out a step if you’re not deep linking (going from the landing page that says “Continue!” to the offer page that says “Continue!” again.
What do you mean by the term “white label”?
First time I heard of it…(newbie)
Hosting the whole offer on your site, and then once they signup is complete, sending them to the merchant. So like on a ringtones page it’s where they enter their number and all that jazz on the actual landing page.
Thanks for another interesting post.
With whitelabeling, how would your Quality Score be affected with Google? If you website is very strong, then I’m thinking it might even fair better. But for most of us beginners, are we looking at a worse QS score and hence higher bid costs?
Also, how do you make users trust your new website, would it only work for programs where minimal trust is required? i.e. non financial.
Great blog. Keep up the excellent work.
Phew, scary stuff! I’d not heard of white labelling before either. Do you know of any guides or anything that elaborate a bit?
An absolutely great strategy. I couldn’t have said it better myself. I’m a firm believer in the ideal that you have to learn to “break even” as the first step to success. If you set your goals realisticly and are prepared for failure and have a back-up plan, you can’t lose.