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Affiliate Website Mathematics

September 12, 2019


Welcome to The Website investor. I’m Jeff Hunt and today we’re going to talk about affiliate website math. Now affiliate websites, as you know, are websites that promote other people’s products and then get paid when there’s a sale. They get paid a commission on the sale of those products. So, they don’t own their own products. They don’t do customer service related to the products or fulfillment of the products. They simply recommend and promote other products. And big examples of those like, Amazon affiliate sites where people review product review articles and then customers visitors click on those articles and go off to Amazon, make a purchase and they get paid. So, I just want to talk quickly about the math behind these websites and what it takes to actually calculate earnings. And it all starts with Google. When there’s a keyword phrase that somebody is searching for related to a product…search or a product research. For example, best cordless drills. Someone might search on best cordless drills and maybe your site appears on first page for that search term. And let’s say that it appears a thousand times per month so you have a thousand impressions of your site on Google News. So, the first part of the equation is the number of impressions times the click through rates. So, the percentage of those thousand people who pass who click on your website on the search result page. That’s the second component of the equation. Impressions times Google click through rate. So, those people click on that site go to your page, your affiliate site page, and then they have another opportunity to click on your call to action and it might be a button called “Check the Best Price on Amazon” or it might be a button, “Go Here to Find the Best Price on a Cordless Drill.”. So, the second…the third item in the equation impressions times Google click through rate. The third item in the equation is the click through rate on the
affiliate page. Are you keeping this in your mind? So, a thousand impressions times let’s say 10% of the people are clicking on your site in the Google search engine and then they get to your affiliate
page and maybe another 15% click, of that, click through to drill, a cordless drill you’re recommending on Amazon, for example. So, those are the first three components of the equation. And you’ll see, if you’re watching this in video mode, you’ll see this on the screen. Otherwise you’ll need to look at
the show notes to see how this math plays out. But then once they get to Amazon a certain number of people a certain percentage are going to convert into buyers. They visit the amazon page. They buy that product or another product that you would get paid
for. In Amazon. So, the fourth component is the conversion rate within the online retailer–in our case, Amazon. And then the fifth component of the equation is the average order size. So, if they click through and they end up buying a cordless drill and cordless drill is a $100 product and then they buy another product, let’s say an extra $50, then your order size would be $150 for that customer. But of course, people have different order sizes because they’re
buying different kinds of products. And that order size is influenced by the kind of thing your
affiliate page is attempting to sell. It’s not wholly dependent on that because somebody might buy the drill but then they might buy you know, a drill bit, which is a lot smaller priced, lesser priced product; or somebody might buy two drills or what have you. So, you end up with an average order size that becomes part of this
equation. So, just to kind of back up: we have impressions times Google clickthrough rate comes affiliate page click through rate times Amazon or retailer conversion rate times the average order size. But we’re not quite done because the last thing is how much commission are you as an affiliate paid on that order. And that’s the final variable in our equation. And Amazon commission rates vary from 0 to 8%. And so, you know, in some retailers, a lot of manufacture affiliate programs, have much higher conversion rates than that. If you’re selling digital products like video courses or software or some other kinds of products you, might have very high commission rates as well. They may be as much as like, 50% or even 75 % or something like that. So, that’s the final element in the equation. And if you multiply all of those factors together, you end up with earnings. And that earnings is the amount that comes from the keyword with however many impressions there were at the beginning of the equation. And so, to calculate all of your earnings, of course, you would need to know that all of the potential keywords that are driving traffic to your sites. Typically, we don’t do it on a keyword by keyword basis. We we would calculate all of the impressions that our page is getting for all the different keywords and multiply it times those things. And that’s, that’s what you end up with in terms of your projected earnings for product. Now, that might sound a little bit complicated if it’s the first time
that you’ve heard it but the opportunity is there because with each of those percentages increasing the Google click rate, which is a topic for an entirely another video because, there’s a lot. We can go into the details of that, but you can click…you can increase the Google conversion rate, you can increase the conversion rate on your own affiliate page. You can’t do a whole lot on the retailer side with the conversion rate that they’re going to buy other than kind of strategically making sure you’re sending traffic to the right kinds of products that are popular. So, you can actually influence that a little bit and then the average order size can be influenced based on the kinds of products that you choose to promote. And then commissions can be can be negotiated, in many cases. And so, there’s opportunities for improvements all across that equation as an affiliate. You can be really creative about how you do that. So, that’s how the math works as an affiliate and I’m sure we’ll have future episodes where we discuss each of these components that are part of the equation because you can make big differences in your total earnings by understanding these equations and then optimizing each of those components. That’s what we have for you today with The Website Investor. Go to flipmind.com/today for tools and resources for your online business. And we’ll see you next time.

1 Comment

  • Reply biyh admic October 19, 2018 at 5:40 pm

    Great work Jeff, more of this good stuff.

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