Is your PPC campaign profitable? How to do the maths

Discussion in 'General PPC Discussion' started by mancar487, Dec 5, 2015.

1. mancar487Jr. VIPJr. VIP

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On the clickbank section of BHW I've often posted about how to track profitability of paid traffic (especially PPC) and several users have asked me that I should also do a post in this section, so here goes...
Note: I'll be using the example of a clickbank product but this applies to any offer from any platform

Calculating/Predicting profitability of a PPC campaign

Let's say you are running a PPC campaign, where you are driving traffic to a squeeze page/landing page - i.e. you are either collecting email leads and promoting to them through follow-ups or sending them to the vendor's page after warming them up with an article. After setting up your campaign, you see that you are spending on average \$1.00 per visitor.

Let's say that you are promoting product X. From Clickbank's marketplace, you see that the product has an average \$ per sale of \$25.5. Notice that \$/sale on the marketplace takes into consideration the product's refund rate, so you will not need to add in extra calculations/assumptions for refunds; these are already factored in.

As the product is paying an avg \$/sale of \$25.5, that means that you'd need a sale per 25.5 visitors to break even (25.5/1.00= ). At the break-even point, you are neither making a profit, nor suffering a loss. Anything better than will give you a profit.

If the product is converting 10% (1 sale per 10 hops), that means that you'll get \$25.5 per \$10 spent.

Profit = 25.5 - 10 = \$15.5

To predict profit of our investment, 15.5 /10 = 1.55

1.55 would be what we can call our profit factor (PF)

Or we can check growth of our investment: 25.5 /10 =2.55..we can call this our growth factor (GF)

Using these factors, we can calculate that if we invest \$1,000 into this campaign, the \$1,000 will become (1000 x 2.55) = \$2,500

And that for every \$1,000 we invest, we will end up with a net profit of (\$1,000 x 1.55) = \$1,550 (i.e. we have earned all our initial \$1,000 back plus and ADDITIONAL \$1,500).

These calculations can be used to calculate returns on a campaign you are currently running, and also to estimate returns of a campaign you plan to run. For the latter, you can use average CPCs (eg from bing/adwords keyword planners) to estimate cost per visitor and you can use the vendor's average conversion rates (you need to ask the vendor) to estimate your conversion rate - however, do note that the conversion rate you will get can be significantly more or significantly less than the average rate (more on this in the next section).

Maximizing Profit

As you can see, profit is going to depend on:

1. how much you spend (\$ per lead/visit/click),
2. how much you earn per sale (you'll know this from the avg S/sale on the marketplace), and
3. your conversion rate.

Number 2. You cannot do anything about as this will depend on the price set by the vendor, the commission rate, and the refund rate. However, as the clickbank marketplace displays this, you will always have an accurate number. Of course, if you are a high volume affiliate, you may be able to negotiate with the vendor for a higher commission rate than the standard set.

Number 1. You have control on by optimizing your ads in terms of the keywords and targeting you use. Avoid non-converting keywords (make use of negative keyword lists), continuously monitor your kws so you keep only those with the best conversion rates in relation to their bids, use ad groups to match ad title, description, and destination url's content with the keywords targeted, and know your demographics so you can target accordingly (e.g. promote English products only to English-speaking countries).

Number 3 - now this will depend both on the vendor and on yourself. The vendor's job is to have a high quality website with a killer copy. Have a good look at the vendor's site before you start promoting and see what you think. Would you buy the product if you yourself had the problem the product promises to solve? Get in touch with the vendor and ask about average conversion rates.
Conversion rates will also depend on you - both in terms of the people you are reaching (your targeting) and on your pre-selling. This is where having a good lander comes in.

A lot of affiliates will focus on getting 'cheap' clicks/visits. But, on its own, how much you spend is irrelevant. The returns on your investment is what counts. You can be getting cheap 10 cent clicks, but if you are only getting 1 sale per 300 clicks on a product that pays \$25 per sale, than you'd be operating at a loss (get \$25, but spend \$30 - a loss of \$5 per sale).

On the other hand if you are paying \$1.00 per click, but getting 1 sale per 10 clicks on the same product, you'd be operating at a profit (get \$25, spend \$10 - a profit of \$15 per sale).

Keep this in mind when comparing different products, different niches and different platforms.

For example, facebook ppc tends to convert less than bing or adwords, but clicks tend to be cheaper on facebook. Which one will give you the best profit? Run a small campaign on each to find out your avg cost per visitor, and use the calculations above to find out.
Note that these calculations/logic apply to all paid traffic, not just ppc. Profitability of solo ads, banner advertisements, etc. can all be tracked using the above system.

If you are fairly new to clickbank or are just thinking about getting started with CB, and are wondering how to pick products with low competition but good demand (the so called 'hidden gems') check out the thread How to Choose CB products for Newbies - a 5 minute guide

Hope this has been useful; now go make some money!

Good luck,
Mancar

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Last edited by a moderator: Dec 15, 2016
2. extreme90Jr. VIPJr. VIP

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Nice guide Mancar, I appreciate because it's going to help newbies.

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3. carlcsolisRegistered Member

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Ok now i'm really motivated by mancar, i've been taking notes here and there from your posts. What I plan to do in 2016 in venturing into ppc (bing) to promote CPA/CB products. I'm unable to build list due to budget constraint, hopefully by starting small I can gather some capital to re-invest into list building or others.

I have a questions, do you think I should send the traffic directly to the vendor's page or send them to a review page of my own with good content, images and call to action links?

Thanks.

4. mancar487Jr. VIPJr. VIP

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I always recommend sending them to your own page first - in most cases, this results in the best conversions.

Re not being able to build a list due to budget constraints, sign up with mailchimp - it is free up to 2,000 subs (and once you cross 2,000 you'll have enough money to become a full member trust me).

Mancar

5. carlcsolisRegistered Member

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Thanks, you're a gem here at BHW. Definitely gonna sign up for mailchimp and will gladly register under your referral link (if you have any). I have one thought in mind and would like for your simple feedback. One of the way of promoting CB is by using youtube and therefore I was thinking to myself that I don't have to reinvent the wheel, just look for 'good' videos and model their success. Any thoughts on that?

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