Budget Limit

May 31, 2007 on 7:39 pm | In Questions and Comments | 3 Comments
I recently purchased your book “Affiliate Millions” to help me get off to a good start in the affiliate marketing world.  Just have the say that the book is great and I am excited, though admittedly nervous, about getting my business off the ground.  I bought the book yesterday and already applied to the 4 affiliate networks that you suggest to start with in your book.  I am waiting on the email approvals, but have spent my time reading ahead in your book and digging around the sites…as well as brainstorming some potential campaigns.  In doing so, I have come up with a couple questions (and so far, unable to find them in your book) I was hoping you could help me out with.
My main concern at this point is my maximum daily/monthly budget limit(of course!).  You mentioned several times in your book to budget only what you are willing to lose.  I am a year out of college and don’t have a ton of money saved up and so I obviously don’t have a ton to risk.  I am thinking about setting my max daily limit at around $25.  While I know that it is going to depend on the program and campaign, is this going to be enough to determine whether a campaign can be successful?  Your input on this would be greatly appreciated!

Posted with permission from an email by Adam M.

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  1. Adam, it is hard to say, without knowing all the other factors, how long it will take you to get a statistically significant sample at a $25 daily limit, but whatever you do, don’t adjust that limit if it is what you are comfortable risking. There are a couple of things you can do to help get that statistical sample quicker, but they all will cost you more money (not necessarily a lot more, though). One IS to raise you daily maximum, but this is the one I think carries the most risk, and should not be a method you use to get that statistical sample sooner. The other would be to raise your bid above what you guess the return might be. This almost guarantees you will lose money per click, but you will get that statistical sample sooner, and will then adjust your bids (probably down) to where you can make the most money (not necessarily where your RPC is the highest, but where RPC * Volume is the highest). Once you have placed your bids at a level where you are reasonably sure you will make more than you spend, you can finally begin raising your daily maximum slowly, now that you can reasonably expect to make more than you spend.

    Comment by Administrator — May 31, 2007 #

  2. I also have a quick question about bidding on keywords. On page 100 in your book, you gave an example on how to determine a good starting point for a bid. One part of it confused me and it may just be due to a typo. It says, “If, for example, the EPC is 4.87 cents (4.87/100=.0487, or roughly 5 cents), a conservative bid would start at either 4 or 5 cents.” I was working through this online as I read and saw that all of the EPCs were in dollars. Ebay, for example, is currently at $3.51 3 Day EPC. So, if I understand, a good starting place for a bid would be 3 to 4 cents ($3.51/100= 0.0351). Just wanted to clarify.

    Posted with permission from an email by Adam M.

    Comment by Administrator — May 31, 2007 #

  3. Adam, you are doing the math perfectly, but I wouldn’t call the resulting bid a “good” starting place so much as a “conservative” one. In my book, I have leaned very much in the direction of the most cautious approach, mainly because in dealing with friends I have coached directly I have noticed a tendency toward overly-aggressive bidding, despite my warnings, that has been quite costly for many of them. You rarely actually pay the full amount you bid, and to get a statistically good sample, I am sometimes willing to lose a little money for a short while, so that I know my EPC sooner and can adjust my bids (probably down) and raise my Daily Limit with some degree of confidence that I will start making money. As a result, I might personally bid anywhere from 6 to 10 cents per click on an EPC of $3.51, and as long as I wasn’t losing more than I felt comfortable with, I would leave it running that way for at least 30 days (eBay has a 7 day cookie for rev share, but a 30 day cookie for active registrations). These bid amounts for eBay aren’t the most conservative – and if you really can’t risk losing much you shouldn’t use them – but they aren’t enormously risky, either, and they will get you to the point where you know definitively what to bid much quicker. It would probably take a couple months or more at the more conservative bid of 3 to 4 cents, but you would likely lose little or no money during that period.

    Keep in mind, though, that a lot will depend on what you are sending people to eBay to buy. The EPC on an ad group for “thingamabob on eBay” might be much higher (or lower) than the average EPC, and you may not get any traffic at all even at 10 cents per click… or you may get traffic at that bidding level, but no conversions. The quality of your ad may affect your actual EPC as well. In a broad market like eBay, that average EPC statistic is not going to be as useful as it might be for a company with just one or two products (or main products). Remember to use Commission Junction’s SID field to track your ad groups separately, too, because a company like eBay will have quite a bit of variation in EPC from ad group to ad group, and you will want your bids set appropriately for each.

    Anyway, don’t feel that you always need to use the conservative starting bid formula I’ve recommended, but understand that the farther you move from it, the more likely it is that you will lose money faster. The flip side is that you will learn faster where that optimum bid might be, and that can get you started making money sooner.

    Comment by Administrator — May 31, 2007 #

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