“Pay Per Click: The Dark, Dangerous Secrets of PPC They Never Tell You That Could Destroy Your Finances!” (Part 1)

You’ve seen the ads and the sales copy everywhere: How to make $300 (or $400 or $500 or….) a day with only fifteen minutes work, or a similar variation of the theme. Usually these kind of promotions are trying to sell you on the benefits of Pay Per Click (let’s use the common acronym PPC).

Let’s be clear: PPC is the most powerful method of direct response marketing known to the human race, period. And if there is one way that anyone can start making serious money on the internet almost instantly, then it’s PPC combined with affiliate marketing.

But what concerns me is that every sales letter I’ve seen extols the virtues of PPC without any reference to the dangers of using this method, especially for newbies on a limited budget. Yes, the dangers of PPC! Every PPC promotion should come with a health warning, something like this: Warning: PPC can destroy inexperienced users financially if used incorrectly.

You’ve no doubt heard the stories and read the testimonials of people who have had great success with PPC almost as soon as they started using it. Don’t be misled by these testimonials. Statistically it is normal that a small percentage of the population of PPC will have spectacular success through sheer good luck. Equally, a small percentage of PPC users will crash and burn. Most PPC users will fall somewhere in between. It’s what’s referred to in statistics as a normal distribution.

The first critical secret of PPC that you need to know is that you need a significant budget to succeed with PPC. Remember, we are talking about normal people, not the very lucky or exceptionally clever minority.

Let’s say you are targeting an income (profit) of $100 per day, or $3000 per month, using PPC and affiliate marketing. Now, if you have a very well set up campaign with a good converting product, you might expect a return of $2 for every $1 spent. That means that to achieve your income target of $3000 you need to spend $3000 on PPC:

PPC Spending __$3,000

Sales _________$6,000 ($2 earned for every $1 spent)

Profit _________$3,000 (Sales minus PPC Spending)

Notice I said “a well set up campaign”. I am also assuming a good converting product. It’s debatable how many people achieve these kinds of conversion numbers, especially newbies.

It gets worse than that. Typically you must pay for your PPC campaigns in advance, although Google Adwords allows you some credit. But most affiliate companies use a 30 day payment cycle, and they pay by bank check. Some, like Amazon, may use a 60 or 90 day cycle. A rare exception is Clickbank, which pays twice monthly. So while you need to spend your PPC dollars immediately, you will not get any return until sometime the following month. So typically you might not get paid for another 30 days after the end of the month in which you actually earned your income.

This effectively means that you need to budget for two months of PPC advertising. In our example that is an initial budget of $6,000.

You can do the numbers for your own situation, based on what you want to achieve. But to put this in perspective: when some guru claims that they made, say, one million dollars profit with PPC and affiliate marketing, it’s very likely that they spent somewhere near one million dollars in PPC advertising. A very sobering consideration, I think you’ll agree!

We are not done yet! More in my next post…….

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