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Why Affiliates Are Losing Money On AdWords
by Andrew Nielsen
In this article we discribe how some affiliates have been lured into advertising at a cost which makes the advertising unprofitable for the affiliate.
A friend of mine recently bought an eBook of the kind where the seller promises their readers that they will tell them the well kept secrets of how to make easy money online, without hardly doing any work. The eBook cost $50 for less than 50 pages of advice on how to sell items on eBay, how to make marketing that stands out and how to become an affiliate and initiate sales of the seller's eBook. The advice was mediocre and at $50 my friend was less than satisfied.
The eBook encouraged its readers to make money as affiliates of the very same eBook by advertising for it using AdWords. This was described as one of the ways to make the 'easy money online'. The affiliate is however very likely to lose money on this deal, I'll explain to you why below.
First however, let's look at how affiliate programs work. A seller may sell a product on the sellers website. The seller can have affiliates who link to the seller's site from the affiliates' website or using sponsored links. If a visitor follows the affiliates' link to the seller's website and makes a purchase, a percentage of the purchase price is paid out to the affiliate. The percentage that is paid to the affiliate varies – for info products it is common for the percentage to be between 40% and 75% of price of the product. Affiliate programs thus allow both the affiliate and the seller to make money on the purchase and both parties can profit from the setup.
In the case of the $50 eBook on making money online and the affiliate advertising online, the situation may look like this:
Let's say that the keywords 'Make Money Online' on Google's AdWords will cost you $1 and that one in 100 users clicking the ad will make a purchase. In this case it costs $100 to make a sale of $50. The seller is unlikely to want to make such advertising as he loses $50 on each sale. If however he can make an affiliate pay for the Google AdWords, by promising the affiliate 50% on each sale, then the calculations are different. The affiliate will now pay the $100 to make the sale. The affiliate will make 50% of the purchase price of $50 so a total of $25. As the affiliate pays $100 to make a sale and makes $25 on each sale, the affiliate loses $75 on each sale. The seller however is left with $25 for each sale after paying $25 to the affiliate. The seller thus makes money on generating sales for Google AdWords where it doesn't pay off for the seller himself to advertise.
The conclusion thus has to be, that if you are an affiliate, be careful with advertising on Google's AdWords or with other sponsored links. While you can make money as an affiliate this way, don't be fooled into thinking that you will become rich very easily.
About the author:
Andrew Nielsen is the author of The Online Business Builder.
A free preview is available on http://www.i-want-to-be-rich.com/.
Andrew is an entrepreneur and internet veteran and is currenly helping individuals and small businesses make money online.
Article source: Why Affiliates Are Losing Money On AdWords
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