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Why Affiliates are Losing Money On AdWords

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Post Why Affiliates are Losing Money On AdWords   Mon Sep 13, 2010 4:35 am

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 sellers eBook. The advice was mediocre and at $50 my friend was less than satisfied. The seller of the eBook was apparently not satisfied with making his $50 on the eBook � he also encouraged his readers to create ads on Google�s AdWords and use this as a means to make the promised �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 should be happy with the agreement.

In the case of the $50 eBook on making money online and the affiliate advertising online, the situation looks 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. If you have paid $50 for an eBook with poor or mediocre advice you are likely to have purchased a product from a scrupulous or even dishonest person and you should be very wary of doing anything to generate more revenue for the seller.

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