When I first started out online I would find a product, put a site up and rank it without even knowing whether I could make much money from the site.
I soon learnt from one of my business partners, how important it was to actually know whether a project could potentially make me much money before starting it.
He shared with me how to mathematically work out the estimated cost of earnings by following a simple formula, and today I am going to share with you THAT very same formula so that you also don’t end up wasting time chasing projects that aren’t particularly profitable.
Understanding what projects to go for is the difference between being a poor affiliate marketer or a wealthy affiliate marketer ;-).
Let me first say, that MY estimation of whether a project is profitable may differ to what your expectations might be.
You need to work out, how much work is required on for your desired project, you then need decide on what YOU would be happy earning on a monthly basis from that project.
When I started out, my expectations were to make a minimum of $100 per month. If a project DO NOT look like it would make me $100 PM then I did not pursue it.
Take some time to work out how much you would be happy to earn based of the required work needed for your selected project and write that value down.
To work out your estimated earnings you need to know two things, firstly your “keywords/keywords” search volume and secondly your “Initial sale value”. These will change for each project but the rest of the formula will stay the same.
The first part of the formula is understanding how traffic percentages change depending on your position in the serps(Google search results). If you look at the image below you will see that over 60% of traffic lands on the websites that are in the top 3 positions of Google.
As you can see when you begin to go past page 1 the traffic becomes non existent. This is HOW important it is to achieve first page rankings, without it the formula is useless.
Understanding Estimated CTR
Now you have a understanding of traffic estimations, the next part in the process is getting to grips with CTR (click through rate) percentages.
Now the percentages I am about to share with you are based on mine and my business partners testing, be aware that your percentages may be slightly different due to many factors but as a rule of thumb follow the percentages I share with you.
We have realized that the CTR we receive on our affiliate links is around 30% if the traffic to site is from a “product keyword”. So what do I mean by that. Let me explain
30% of visitors who click on our affiliate links arrive to the site by searching a “product keyword”.
For example. (blank filled in by the “product name”)
So if anyone searches in Google the product name or product name followed by additional words, we see a 30 percent CTR on our affiliate links for that product.
Any traffic we receive through keywords that are not “product keywords” we notice a significant drop in the overall CTR on our sites.
Only 10% of visitors who click on the affiliate links on our site are from “non product keywords”, so it’s important you understand the percentage differences between your keywords.
The final step to the process.
To estimate your earnings, the last thing you need to know is the conversion rate for your affiliate links. Now since you don’t know this yet we will make it easy and go for the bare minimum conversion rate which is around 5%.
It is very likely that your conversion rate will be higher once you begin testing new things with your projects but for the sake of this formula it’s best to work it out at 5%.
What do I mean by 5% conversion rate?
Of the 30/10 percent of visitors that click on your affiliate links, only 5% is likely to buy.
We now know everything we need to know to work out our potential earnings per project, so with that being said let’s move on to the formula for working this out.
Putting it all together.
The formula to work out your estimated earnings looks like this;
Total Traffic x Expected Traffic x CTR% x Conversion% = # Estimated sales
# sales x Commission = Est. total revenue per month
Now I know you may be looking at this, and thinking “What the hell”, so let me explain.
Total Traffic = The total search volume for your keyword/keywords. So if I was chasing a keyword which had a search volume of 12,000 monthly searches, then 12,000 would be our Total Traffic.
If you are trying to rank more than one keyword, then add together the total volume of all keywords to give you a combined search volume. Remember your search volume means Total Traffic.
Expected Traffic= The traffic amount you receive based on the position you lie within the serps( Google search results ). Remember the values from the graph?
Holding first position in the serps, would mean that you should receive around 34% of the overall traffic to your site, but for simplicity let’s round this up to 35%, which is 0.35. Second place is 0.18, third place is 0.10 and so on.
CTR= Click Through Rate. So it’s either 30% or 10% depending on whether the keyword you are chasing is a “product keyword” or not.
Conversion= The conversion for your sales which is 5%.
Estimated Sales= The total value of Total Traffic x Expected Traffic x CTR% x Conversion.
So it’s 12000(my search volume) x 0.35 = 4200
4200 x 0.30(product keyword) = 1260 OR 4200 x 0.10(non product keyword) = 420
1260 x 0.05(conversion rate) = 63 OR 420 x 0.05(conversion rate) = 21
meaning 63 = Estimated Sales OR 21 = Estimated Sales
Commission= The amount you receive per sale you make,
So if my commission amount was $40 It would be Estimated Sales(63 or 21) x 40(commission amount) =
You have your estimated earnings!
In the above example I calculated my estimated earnings for first position of Google only, if you want to check for any other position in Google be sure to change the Expected Traffic value. For adsense sites, the formula will need tweaking, I’ll leave that down to you to work that bit out
By using this formula you are now able to work out if a project is going to meet your minimum earnings expectation before starting it, it will save you from wasting endless amount of time on projects that might only make you pocket change.
As already mentioned this formula was based of our own testing and your results may differ somewhat.
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