Saturday, February 16, 2008

Cashing in with Pay-For-Performance Advertising

Generating website revenue using pay-for-performance advertising seems easier than it really is. You display and add a new website for a product or service, your reader clicks on the ad then purchases a product or service, then you get a commission.

Unfortunately, this type of marketing, known as affiliate marketing, is an art form.

Here are the advantages to using pay-for-performance advertising.
When it works, the revenue can be huge. Instead being paid a few cents per click, typical payouts are in dollars, tens of dollars, and even hundreds of dollars. Some products can be incredibly lucrative based on commissions.

Another advantage is that readers who take your advice and purchase something based on your recommendation have a tendency to do it over and over and over again. Finding the right products and matching them with the right readers can generate long-term revenue.

The final advantage is that it's a win-win-win situation. You earn money, the advertiser has a guaranteed sale, and the reader ends up with a quality product.
There are no disadvantages to pay-for-performance, however successful implementation is very difficult.

Here are some common pitfalls.

You need double credibility. First, you must have high credibility with your readers for them to follow your recommendation. Second, the product you're promoting or the company distributing that product must also have credibility. If either of you lack credibility at all, you make a very few sales.

You need readers predispositioned to buy. Certain topics are bad fit for pay-for-performance. If your readers generally don't have disposable income, or if the readers want free information, they are less likely to make a purchase.
Case Study: One of my callers in a recent telephone seminar was convinced that pay-for-performance ads were useless. He had a website that published cheat codes and hints for popular console-based video games. On each page he had an ad for that video game linked to Amazon. He literally had sold enough items each month to cover his hosting fees.

My advice to him, simple enough, with first of all to place pay per click ads on each page. He would get revenue from all the companies who had bid on popular video game titles as keywords. My second piece of advice is that he replaces pay-for-performance ads for the same game with ads for similar games on the same console. If his reader was looking for hints about a new first-person shooter Xbox game, there's a good chance he could sell them a different Xbox game in the same genre.
Your website may be too advanced. If your website is targeted toward gourmet chefs, make sure the ads displayed are not for cookbooks with quick and easy recipes. Additionally, most gourmet chefs will have very complete kitchens, so only extremely unusual kitchen tools will sell.

You're selling cheap stuff! If you're going to bother creating pay-for-performance ads and blog postings, sell high-end merchandise. It takes just as much time and effort to push a $100 item that pays 5%, as it does to push a $5.00 item that pays 20%. The exception to this is if you have extremely high traffic. High traffic balances out cheap stuff to a degree.

You focus on percentage rather than conversion. With pay-for-performance, conversion is key. If the item doesn't sell it doesn't matter how high your commission. When choosing items to sell focus on the bottom dollar per conversion rather than commission percentage. If your computer website earns 2% of the laptop sale, but 10% of software, you should probably focus on laptops. A tiny percent of the $1000 laptop will generate more than a bigger percentage of a $30 software package.

If you avoid these pitfalls, you should be able to generate stronger commission revenue from your pay-for-performance ads.
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