Remember the Simple Mathematics of Pay Per Click

Some have the PPC experience of a geriatric turtle whilst many are only just starting out with testing PPC campaigns, landing pages, ad-copy, and fine-tuning all of these factors as a means of maximising profit. With this in mind, one thing that never fails to amaze me is the frequency of which I speak to affiliates who have not thought through the raw figures of the campaign they are spending their hard-earned wonga on.

Let me give you an example.

I recently spoke to an affiliate who was using PPC to promote a videogame store on a sales campaign. The store paid out 5% commission and he had been told that the average order value was £26. So, it doesn’t take ‘Arnold Cleverbugger’ to calculate that every successful conversion will be worth, on average £1.30 in commission to him.

Now, videogames retailers have more competition than the Olympic Games, so there is a fair chance that conversion rates (unique visitors/number of sales) wil be no higher than, let’s be really generous, 3%. (TOP TIP: this is the conversion rate to PPC traffic, not other types of traffic that may have higher conversion rates and distort the figures.)

So, following our example, every 100 clicks purchased will yield £3.90 in affiliate commission.It follows then that the affiliate must be buying clicks for less than 3.9p per click to be showing an operating profit.

Can this be done? Possibly, but the affiliate I was speaking to had his maximum bids (all of them, as he hadn’t heard of keyword tracking/identification) set to 10p per click, paying on average 9p per click. So, for every 9p he spent, he would earn, on average, 3.9p.

Now that is a very quick way to fall out of love wth PPC, not to mention your bank manager who wants his pound of flesh and your new lady-friend who has her eye on those new Jimmy Choo footwarmers.

So, the moral is to look at the simple mathematics first and select campaigns from there. Then, with split-testing, accurate tracking, and ongoing optimisation, the rest will follow.

It really is all just very simple mathematics.