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Exercise in Stupidity: How Not to Succeed in Affiliate Marketing

May 16th, 2007

Yesterday, while searching through some of my regular blog sites, I followed a link to a site called TylerCruz.com and discovered an almost unbelievable case of affiliate marketing failure. After a 15-day “plunge” into the world of PPC (Pay Per Click) advertising, this site owner managed to lose $927.70 and even posted this screenshot to “brag” about it.

While it is normally not very nice to criticize another webmaster like this right out of the box, I am hoping that in this particular case we can extract some positive lessons from it. This little experiment has provided an excellent case study for newbies who may be considering a similar foray into the world of affiliate marketing. As I see it, our test subject here has made five classic newbie mistakes that we can use as learning opportunities in our quest for money-making enlightenment.

1. Jumping into an overly competitive niche

Tyler’s first mistake was choosing four niches that already had lots of competition. This almost always spells trouble for beginners. They will either wind up paying too much per click and lose money, or they will get very few impressions for their ads because they will not be able to make it onto the first page of Google AdWords, Overture, etc. Tyler managed to do both of these; he only got one impression for his ads on the first day even though he had lots of keywords. Then in an effort to get more clicks, he raised his bid prices to ridiculously high levels (he was up to $3 cost per click at one point). Not surprisingly, the results were unfavorable.

2. Setting bid prices too high in the beginning

When first entering a niche, most smart PPC advertisers will begin with relatively low bids and split test their ads to raise CTR (click through rate) and quality score over time. Then they will slowly raise their bids, but they do this only on profitable keywords and only when this is necessary to obtain desirable ad positioning. Unfortunately, our hapless newbie did the exact opposite of this, bidding very high for competitive keywords right from the start. As a result, he ended up burning through cash so quickly that he had to apply for a credit limit increase on his MasterCard. Ouch!

3. Emphasizing volume instead of conversion

It is tempting to think that more clicks always equals more money. From this hypothesis many newbies will target the high volume keywords right away before they even bother with looking at the conversion. But this is really the wrong way to do it. It’s more important to make sure that you have good conversion and ROI before increasing volume. You’re better off financially if you are getting a 2% conversion rate out of 1,000 clicks than you would be if you get only 0.5% conversion from 10,000. Even though you will usually get fewer total sales at first, your ROI (return on investment) will be higher, and you can always increase volume later by slowly adding more keywords to your campaigns.

4. Not learning from mistakes and modifying as needed

While many newbies start out with lots of ignorance to overcome, there is a difference between ignorance and stupidity. The ignorant (but not entirely stupid) beginner will learn from mistakes and modify his/her actions as needed to improve unfavorable results. But the stupid person will keep banging his/her head into the wall of failure over and over again and then complain because it involves too much work.

In affiliate marketing, it is important to quickly learn from our mistakes and continue to modify our advertising campaigns until we achieve desirable results. With Google AdWords and most of the other major PPC companies, it is possible to set a daily budget for our accounts so that we do not spend too much money in the beginning. Amazingly, Tyler did not seem to do this until he had lost nearly a thousand dollars and maxed out his credit card. If you’re losing that kind of money, it’s definitely time to set a limit on your advertising budget while you rethink your strategy.

5. Giving up too soon

Another interesting behavior pattern that I have noticed in many newbies who have the “get rich quick” mentality is that they will begin a “make money online” project, realize that they are not doing as well as they had hoped, and then give up before they gain any significant experience. Then they discover a new project or another program, lose some more money, give up on it, and start the same cycle all over again. Some people will continue to repeat this process until they become so broke and cynical that they are forced to abandon the Internet lifestyle altogether and go back to their corporate wage slave jobs.

Although it is too early to tell whether or not Tyler is giving up on affiliate marketing completely, I noticed that he has not posted anything about it for the past week or so. In his last relevant post, he said that he is taking a break because he does not want to get “too bored”. Interestingly, he was actually showing some progress near the end of the 15-day streak, bringing his ROI up from nearly -100% to -47.39%.

If he’s smart, he will find a less competitive niche, start with lower bids and a reasonable daily budget, make sure he is able to achieve a decent conversion ratio, and keep tweaking his ad campaigns until he can achieve some solidly favorable results before attempting to put anything on autopilot. Otherwise he may continue to go down the path of getting bored, losing more money, and chasing the “next big thing”.

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