One of the most difficult aspects of building a business driven by affiliate revenue is calculating profit potential. Without knowing how much a site stands to earn, it’s hard to make decisions about how much you should invest to grow it.
When you enter a new niche as an affiliate, particularly if you’re focusing on organic traffic, you don’t know:
a) How well the products you’re promoting are going to convert. You can do all the qualitative analysis you like of a merchant’s landing page, but when it comes to conversions, there are always surprises. Further, with Amazon, you earn for stuff you don’t promote, so conversion rates (of your specific product) are only half the puzzle of how much you’ll actually make for the number of clicks you send.
b) How much traffic you’ll be able to get. You can make estimates based on search click through rates, but you can never be sure how well you’ll be able to rank for your most important terms, or how many long tail terms (who’s CTRs and conversions could be much higher) your specific piece of content will pick up traffic for.
It would be great if we could look at a niche, look at the available organic traffic, look at the products that are being sold, and be able to say something like
“If I have 10 articles, targeting those 10 product keywords, I should be able to make at least $2,000 a month”…
regardless of how long that takes.
If you know that a site had the potential to reach $2,000 a month in revenue, you could happily invest $10,000 in promoting it to reach that point.
If you weren’t in a hurry to draw out a profit to fund your life, plenty of entrepreneurs would invest $30,000 or $40,000 to reach that point. So what if it takes 15 months, or 20 months to turn a profit? That’s what serious businesses do.
The point is you can’t invest without some indication of a likely return.
The difficulty of getting that kind of an indication, for an affiliate business like ours is a problem that’s bothered me for a number of years. This post is my most dedicated effort yet to overcome it.
First, Some Comments About What This Is (& Isn’t)
This isn’t a spot on predictor of income.
It’s a way to create a projection; A possibility; A benchmark to aim at.
And it’s an intentionally conservative projection.
It’s designed to get you a number that you’re happy with (as in “It’d be worth my time and effort if THAT’S how much this site could make”) but a number that you’re likely to beat. You’d much rather be in the situation of having a site turn out more profitable than you expected, than less.
It’s also designed to be an evolving projection. With the instructions below you can get a “first number” then you can adjust it (also based on these instructions) as you enter that niche and get a clearer sense of the likelihood of the scenarios described.
All that said, let’s get on and do this thing…
Step 1: How Much Traffic Could I Get?
This whole process works by calculating the potential profitability for each product driven article on your site. And the first question to answer is, “How much traffic could this article get?”
Let me use the example of a Breville Toaster Oven (an example our CPC students are sick to death of).
This assumes I’ve written an article about Breville Toaster Ovens (either a product review if there’s only one model, or a comparative article if there are more than 1)
a) Use the keyword research tool of your find the monthly search volume of the main three keywords that article targets. The three terms with the highest volume that your article is relevant for.
In this example, the number I’d be starting with is 8550 searches a month. The top three terms added together.
Why only 3? Because it’s faster. Afterall, you may end up doing this for a lot of products.
You’ll rank for many more keywords than 3. And if you want to get a more accurate profitability reading, you could add the totals for say the top 10 keywords. Just understand that adding the extra 8 keywords may not change the result significantly.
If I added the remaining 7 keywords volume on this particular search, the volume would be 9700. That’s a 13% increase. It’s not nothing, but you’ll see as we continue it’s not going to have a huge impact on the overall result.
Your top 10 keywords for that article might look different, and with volumes much closer together. In that case, add up more than the top 3. You can’t go too wrong on this step.
Step 2: How Much Traffic Could I Get?
This part is easy enough. Assume you could reach position 3 for the top 3 (or however many you chose) keywords. At position 3, organic search data suggests you’ll be looking at an approximately 10% click through rate, but because we understand copywriting (and based on my experience with my own sites), I like to assume a 15% Click Through Rate here.
That means 15% of the total monthly searchers will end up on your site.
For Breville Toaster Ovens, you’d be looking at 8550 x 0.15 = 1282 unique visits a month to that article.
Why assume we can reach position 3, regardless of the keyword difficulty? And why assume 15% CTR?
Before I answer, remember that this process isn’t about making calculations, it’s about making predictions. This is a guess, but we want it to be as good a guess as is possible with the information we can get.
Besides being based on large scale organic search CTR data, these are the reasons I think position 3 for your top 3 terms, and 15% CTR represents a good guess.
- First, I leave room for there being at least two sites that no matter how hard I try, I’ll never beat. It could be the manufacturer website and Google just won’t rank me above them. It could be another incredible affiliate with way more authority than I may ever get.This calculation doesn’t factor in the times where you’ll hit position 1, and see 30% CTRs or higher. That can represent a good chunk of traffic if it’s for one of your shorter tail terms, but I’ve left it’s possibility out of this calculation to balance the possibility of you not reaching position 3 either.
- Second, I assume that if I don’t get to position 3 for those top 3 terms, the longer tail terms where I’ll rank higher than 3 will help make up the slack on the traffic front.
Now that you’ve got a prediction for number of visitors, we have to think about how many of them will click our affiliate links.
Step 3: How Many Of My Visitors Will Click Through To Amazon?
This one’s easier. As long as the pieces of content in question are targeting product centric keywords, those such as:
Breville toaster oven
Breville XP90 toaster oven
Breville toaster oven review
Best toaster oven
toaster oven reviews
and not terms like:
how to heat bread (or whatever would be the task centric/result centric, rather than product centric equivalent)
and as long as you’re following my guidelines for writing good product reviews (most of which apply to any kind of product centric content)
You can assume 40% will click through to your affiliate link.
I’ve seen CTRs of 30-60% for this kind of content repeat themselves over so many sites, my own and my students’, for many years. For strong copywriters and product review creators, I think it’s even a little on the conservative side (another balance to our position 3 ranking assumption).
The great thing is if you’re not getting that rate, you can always improve up to it. Clicks on your affiliate link have nothing to do with the merchant landing page (since the visitor usually hasn’t seen it yet) and everything to do with what’s in your content. Tweaking your content and your landing page based on my guidelines above can almost always push you into that CTR.
Bottom line: This is one of the more certain figures in the calculation.
By the way, if you’ve already got a site up and running, how do you know how many of your visitors are clicking through to your affiliate links?
- The ad-hoc, cheap and nasty way: Comparing your unique page views on the article, to total number of clicks for that page’s tracking ID links in Amazon (Note, you have to actually setup tracking IDs in Amazon for that, which we’ll talk about shortly.)
- Setting up Event Tracking in your Google Analytics: There’s a comprehensive guide on how to do that here.
Step 4: How Much Revenue Will You Generate For Each Click Through To Amazon? (Your EPC)
Note that I’ve not said “What will your conversion rate be?”
Typically, (that is with non Amazon affiliate promotions) your earnings will be strongly correlated with the price of the product you’re selling, and how well that product converts.
But with Amazon, you’re earning income on all the products a person buys in that 24 hour window, whether you’re promoting them or not. That factor may boost up your earnings per click on lower items, while the cookie expiring after 24 hours may cut back your earnings per click on higher end items, as people deliberate longer over their purchases.
There are so many factors involved that it’s extremely hard to predict how much you’ll earn for each click you send Amazon. The numbers can vary significantly.
I went through my own account and looked – at an individual post level which requires that unique Tracking IDs are setup for each post – at EPCs for a sample of about 30 products/posts ranging from $80 to $600.
Before I discuss what I learned from that, I want to show quickly how I did that, because I consider it extremely important for an Amazon affiliate to know.
How To See Your Own EPCs
Go to your Associates Account and to the tab in the top right that says “Download Reports”.
Choose a time frame, the longer the better, and select Tracking ID Summary
When you’ve downloaded the report, open up the spreadsheet, look at the bottom of screen (bottom left) and click on the tab that says Fee-Tracking.
This is a breakdown of your fees earned per tracking ID… that is per page on your site.
From here, working out your EPC per page is easy.
Look at the “Clicks” column… then look at the “Total Earnings” column.
Here’s a slice of the first 5 tracking IDs in my account so you can see clearly:
Divide total earnings by clicks, and that’s your EPC for that page.
In this example above, the EPC for that first tracking ID, is $181.35 / 324 = $0.55
I earned 55 cents for every click I sent through that link.
Incidentally, those 5 tracking IDs happen to be for the same page (I like to compare the CTRs and EPCs across the different links on any given page to see which performs best and test different options). If you do the same, you would add up the total clicks and total earnings and divide those, to get the page/product level EPC.
Ok, back to my own EPCs and what they tell us…
Findings From My Own Amazon EPCs
Looking at EPCs across my account for the last 12 months, here are some points you might find interesting when making your own calculations.
My account level EPC was $0.62.
(Please brag in the comments if yours is higher so I can congratulate you!)
That’s calculated by your total earnings divided by your total clicks over whatever period of time. That data is right there on your Reports page (after you’ve chosen your time frame).
Individual product EPCs varied from $0.14 to $0.84.
Generally, more expensive products had higher EPCs but there were PLENTY of exceptions.
Even when you lose out on a sale because the person who clicked through didn’t make their purchase decision within 24 hours, you make up for it in other ways.
Promoting more expensive products means you’re targeting an audience with higher disposable income. If they’re looking for a $2,000 laptop, chances are day to day items they buy from Amazon are more expensive than average too.
Some of my $80-$100 products reviewed got EPCs of over $0.50. Some of the $500+ products got lower than $0.20 EPCs.
The reasons why will remain a mystery. Fortunately we don’t need those reasons to create a decent prediction for profitability.
Which EPC Should You Use For Your Profit Calculation?
Here are the options:
- Most Accurate EPC (site already established): If you’re already set up, getting traffic and making some sales in your niche, use your account level EPC. Keep adjusting the calculation with time as you get more data into your account. But an EPC based on say… 10 000 clicks minimum… isn’t likely to change significantly enough to affect your projections.
- Take a Mid Range Conservative EPC: Which I would call $0.30, as long as you’re aiming at promoting products ranging from $100 to $500. Based on my experience, (and if you’re following my kind of product review, value adding content method) you’re more likely to end up with a higher, rather than a lower EPC than that.
So it’s either your account EPC, or $0.30. Got it?
Step 5: Make Your Final Calculation
Spelled out simply, assuming that:
a) You’re targeting product centric terms
b) You’re following best practice for creating product centric content
c) You mainly promote products in the range of $100 to $500
Your profit potential calculation per page of your site, and per product you promote is:
Combined Search Volume of top 3 terms X 0.15 X 0.40 X 0.30 (or your account level EPC)
This whole post could have been one sentence. I don’t know how I feel about that…
Step 6: Fill This Table For Sitewide Calculation
I made a little Gdoc for this that everyone can see. You can save a copy of this and make your own profit calculation right there.
There are some extra bits that this sheet requires, that are mainly for people with already established sites. If you don’t have an established site you can leave them blank:
- Insert the URL of the page where you promote that product. It means you can see your profit potential a URL level rather than just a product level.
- I like to nsert the product name and price too for the same reason.
- The Pageviews column I like to have so as I start to get traffic, I can compare actual traffic to projections and adjust the numbers if I see a big discrepancy.
When you’ve done the numbers for each of the pages of your site, or products you’re promoting, adding the projected revenue for each will give you the total site’s projected revenue.
You’ve now got a conservative estimation of your likely profit on this site, that you can use to guide your investment in and work on the site from this point forward.
You’re also ahead of 90% of people trying to start a business online* (*not an official statistic :))
Advanced: Add Keyword Difficulty For Better Investment Decisions
If you want to take this to the next level, you can add a column for keyword difficulty into this table, where you just insert the KD (from whichever keyword tool you prefet) for the main keyword you used in the calculation.
This will let you spot opportunities.
Maybe the profit potential of one page is only $100 a month but it’s an easy $100 to get, so you make your first investments promoting that page, to get a quick win.
Maybe your two highest profit potential pages have a big separation in difficulty, so it’s obvious you should work on ranking the lower difficulty page first, and so on.
Of course, a keyword level difficulty score presents it’s own inaccuracies and doesn’t take into consideration the kind of “anomalies” that CPC members are familiar with, but it’s still better having this column than not having it, when it comes to choosing how to invest in your site.
Parting Thoughts (& What I Want From You)
As well as a smart business strategy, having a realistic projection of your new business’s profit can be extremely motivating.
You can look at that number every day and know that
“The only thing separating me from that number is my ongoing effort”.
I think that’s pretty cool.
Lastly: Tell me in the comments if you can see a way this calculation can be improved. I can do numbers but I’m not a “numbers guy”. I know some smart person will look at this and say “but why not add X into the mix?” and I will thank them profusely.
Also: Tell me your own account EPCs from Amazon in the comments, along with some rough details about your niche, like the average price points of the products you promote. This will help other readers in working out a number to use for their own EPC calculations!