I’m sure you have all heard of Flippa. If you were selling a website 4 or 5 years ago you would write the sales pitch for your website and post the copy in the marketplace room of over a dozen or so webmaster related forums. One of the best places to do this was the SitePoint Marketplace, which was rebranded as Flippa a year or so ago.

Today Flippa is recognised as the number 1 place to buy and sell websites online (domains are sold too but domain trading is more active elsewhere). Dozens of new websites are listed for sale everyday, from small turnkey websites with duplicate content to businesses which sell products and make tens of thousands a month.

Unfortunately, there are a lot of sellers on Flippa who will do anything to increase the value of their site for sale, ranging from those who bend the truth a little to scammers who will lie about their sites income and traffic. Though if you do your research and get proof of traffic and income you’ll be OK.

Unrealistic Website Valuations

Flippa is fast becoming a great place to sell a website but a terrible place to purchase one, largely part to it’s own popularity (a victim of it’s own success if you will). It really is hard to find a good website at a realistic price on there now and the few websites that are priced well are snapped up very quickly.

The main problem is valuation. Many sellers become too attached to their websites and therefore have unrealistic valuations of them. Unfortunately, this tends to happen with medium to large sized sites as sellers at the lower end of the market are usually happy to take anything they’re offered. This can be very frustrating as a buyer, particularly when a site comes along that’s perfect for your portfolio.

I had a discussion about this subject two months ago with Chris Beasley, a webmaster I admired greatly 10 years ago when he was an active moderator at SitePoint. Chris was selling one of his coupon websites on Flippa in February. Years ago this site was making over $1,000 a day, however competition and lack of updates over the years had dropped the income to around $200 a month, which was generated through the sites 120 unique visitors per day.

This kind of thing is common on the web i.e. the income for some websites are really high at the start because they were the first to enter the niche however competition from other sites (and changes in the way people browse and shop the web etc) starts to reduce income over time, particularly if the site isn’t maintained. Though you can’t let the fact a site used to make money skew your valuation of the site or you’ll never sell it (I once sold a discussion forum for $40,000, even though a few years earlier it was making $20,000 a month).

Which is why I was really shocked and surprised to hear that Chris wanted at least $50,000 for the site. Chris isn’t a fool. He has made good money on the web for over 10 years, but clearly he has an attachment to the site if he thinks a site making $200 a month is worth over $50k.

When talking about another site he owned he stated:

I would sell it for 25x yearly revenue, (the multiple AOL paid for WebLogs Inc, which didnÕt have much more traffic), but not 25x monthly revenue.

I don’t believe that there is an exact way to value a website. It depends on lots of factors such as the domain name, age of domain, search engine traffic, brand name, current income, past income, operating costs, future growth potential, time needed to run the site and much more.

Which is why I don’t agree with the consensus that every website should be priced at between 8 to 24 months income. Generally speaking, the more stable a sites income and the less time I need to spend updating the site, the more I would pay for it. However, 300 times monthly income is insane. It would be safer and more prudent to simply place $60,000 in a bank account and scrape off the interest, or even just set up an annuity.

Again, I remind you that Chris is an experienced webmaster and not some new kid to the block. And he is not alone in his thinking. Many webmasters who sell sites which they have owned for more than 5 years are pricing themselves out of a sale.

What do websites sell for on Flippa?

The price of a website is somewhat subjective. What’s worthless to you might be perfect for me, which is why you see some websites sell for more than what you think they are worth. Whilst we won’t all agree on what sites should sell for, we can look at at what websites are actually selling for on Flippa.

And that’s exactly what Kevin Eklund did this week in his article ‘How Much Is Your WordPress Blog Worth, Really?‘. Kevin looked at a number of auctions on Flippa and noted what they sold for. He also looked at the PR of the site, it’s traffic, and it’s monthly income.

He found that the average site sold for around 13 times the monthly income however a site sold for as low as 2.27 times monthly income and another sold for 63.06 times. Clearly these figures tell you nothing without seeing the site in question, though the average sale price does suggest that most sites sell for around a years income. It would be interesting to see what the average sale price was for sites under $1,000, sites under $10,000 and sites over $10,000.

Regardless of the average sales prices, it’s important to remember that every website is different, which is why some sites sell for just a few times the monthly income whilst others sell for over 50 times the monthly income.

The Opportunity Cost of Buying a Website on Flippa

It’s easy to get into a bidding war when you find your ideal website on Flippa. However, you should really set a cut off point for how much you are going to spend. Do some research and look into how much time and how much money it would cost to develop a similar site yourself (if it’s even possible to do so).

This is very simple to do with cheaper websites as they take the seller so little time to build. I stay away from most of these sites as I could build them myself and fill them with good content within 4 or 5 hours. They usually sell for a few hundred dollars and their monthly income is low so it takes a long time to get your investment back too. More importantly, the seller values on the site on 1 or 2 months income, which isn’t long enough to indicate whether this was a fluke or a sign of things to come.

It’s harder to do this with established sites as it takes a lot longer to develop them plus there are other factors you need to consider.

Here are some things which you should look into before buying a site:

• Could you build the site yourself?: Do you have the skills/knowledge to build such a site. Could you hire someone to design such a site and/or write the content? If not, you may be willing to pay a little more for the site.
• Time: How much time would it take to develop a site to the same level of income? Do you need this site now or would you be happy to wait and develop one yourself?
• Traffic: Has the sites traffic been increasing or decreasing? You may be willing to pay a little more if traffic is increasing steadily every month whereas a site with decreasing traffic suggests you may need to spend some time updating it, therefore your valuation of the site should be less.
• Income: How long would it take you to develop a site with the same level of income? Does their income come from many sources or from one particularly source (e.g. only advertising or only product sales). Could you purchase the site and diversify income?
• Search Engine Presence: Are the sites incoming links organic or do they come from other sites the seller owns. If so, will these links be kept? You may have to spend a little more for a website which has thousands of organic links, though it could be worth it.
• Domain Name: Does the site have a great domain name? Has the domain been registered for years? The site will cost more if this is the case. How much would it cost you to purchase a domain name of a similar quality?
• Brand Name: It’s difficult to put an exact value on the brand name of any business, but you cannot disregard it. Established sites within a niche will be successful for years to come. This is why many established sites sell for a premium.

Put simply, is the website for sale worth the sales price or would you better developing a site of your own from scratch or even investing the money into a website you already own.

Overview

I am not trying to discourage anyone from buying a website on Flippa. It’s a great place to sell a website but there are still some bargains to be found for the shrewd buyer as well.

Though I do think that in many cases it’s cheaper and better to build a similar site of your own from scratch and develop it yourself, particularly when the site being sold is overvalued by the owner. My advice to you all is to take your time when placing any bid. Do your research and see if the site traffic and income is real, determine whether the price the seller wants is justified, and look at the alternative option of building a website on your own.

Remember, it’s a buyers market. So don’t rush into anything you will regret or let anyone pull the wool over your eyes.

Good luck,
Kevin

Kevin Muldoon is a webmaster and blogger who lives in Central Scotland. His latest project is WordPress Mods; a blog which focuses on WordPress Themes, Plugins, Tutorials, News and Modifications.

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At this point in my little experiment I’ve made some money and learned a few pro’s and con’s about this affiliate marketing industry (at least the low-end type):

Pro’s of simple affiliate marketing:

• It’s possible to start making money very quickly with relatively little work.
• It’s possible to scale up successful campaigns to large levels.
• It’s possible to “sell” a product without knowing anything about it.

It’s not hard to see why so many get-rich-quick books teach this very method of making money…because it SEEMS like it could work for anyone. Some people might even have some nominal success trying something like this, but very quickly the con’s start showing their head:

Con’s of simple affiliate marketing:

• It’s possible to LOSE those quickly-gained profits very quickly also.
• Most successful campaigns you create will start to garner much attention from other affiliate marketers who quickly start copying you.
• You have to be hush about your work….you can’t openly talk about what you’re promoting or your methods. This is why many people I talked to about this were so secretive.

By and far the largest con I see with doing this simple type of affiliate marketing is there is no long term value being provided. With my business HouseOfRave for example, everything I do today pays off for months at a time, even years.

With these small affiliate promotions, there is very little value ultimately being imparted to the customer. Ultimately a beginner trying to simply “make money online” with these almost-scam-like promotions will probably end up disappointed.

But screw that, I was now up to $371 in profit with JUST BluCigs and I’d barely spent $70 to get there!

….and this experiment called for finding out how to make a landing and optimize it with Google Website Optimizer, so that was the next step.

Basically what I’m trying to do in this step is have several versions of the same page and measure the effectiveness of each. After X-amount of people cycle through each version, a clear winner is usually identified. This is called an A/B Split Test…and if you do this enough, you can identify which pages convert the most people.

For this I had to do several things:

• Make a separate landing page to send traffic (I chose ecigaretterecs.com).
• Make three different versions of the page.
• Enter all this stuff into Google Website Optimizer.
• Drive traffic to the site, wait for results.

I didn’t say this experiment was going to be pretty, I just wanted to learn the underlying lessons in it, so here goes:

Step 1.) Buy the domain name.

I chose ecigaretterecs.com because all sorts of other combinations were taken. Ultimately it didn’t matter what the domain was. Even I kept forgetting what name I had purchased. I setup the site on my server and was up and running.

Step 2.) Make three versions of the page.

I wanted a basic page that looked sort of like a reviews site, a site where you go to get reviews of a particular genre of product. I actually first purchased a WordPress plugin that makes a fully-functional reviews site, but I wanted this experiment to be extremely quick and dirty so I did it the ghetto home-made way.

Since E-cigarettes are quite new, there are multiple brands people want to look through before choosing one. I would provide this review information for them on this (ghetto and poorly made) page (ecigaretterecs.com).

I decided I would make three very different versions: 1 stylish, 1 simple and plan, 1 supper-ghetto:

…the point of this is to simply test out different versions and see if there was any statistical difference in how each of them converted into sales. Sometimes the data is very surprising. I find from many friends who do this on a large scale that ugly and simply is often better.

NOTE: An A/B Split Test doesn’t need to have versions that are so dramatically different like this experiment, it can simply be a different picture or different headline text for each version.

Step 3.) Enter into Google Website Optimizer

I went through the Google Optimizer process and outfitted each version of the page with special snippets of code (keep in mind this is something almost ANYONE can do) and set all the links to go to the affiliate sites I earlier created with the custom headers.

Now when someone lands on the webpage ecigaretterecs.com, it randomly selects which version of that page to show the visitor. So if you look at that page from your computer and your friend views it from a different computer, there is a good chance you will see a completely different page.

Google Website Optimizer then collects information over time and tracks the conversion rates to see if there is a statistically “better” version. When I ended up pulling the plug on this experiment there were 190 page visits, but no statistical variance shown (you usually need around 50 conversions per variant before conclusions can be drawn).

I didn’t get the final results before I pulled the plug on this experiment, but I didn’t care. I had learned how to A/B Split Test which was the important thing….now I can use it to make already-profitable pages more profitable.

So far I’ve accomplished almost everything I set out to learn with this experiment, and I even made some money.

I was still making money, so why did I finally end up pulling the plug on this experiment? You’ll find out in the final part tomorrow.

Neville Medhora blogs at NevBlog.com and is the founder of House Of Rave.

What is bounce rate?

Bounce Rate is the total number of visitors that view one page divided by the total number of page visits. If you have Google Analytics installed then I’m sure you’ve looked at this number before, but if you’re like me you may have paid little attention to it at first. I suggest that you reconsider the importance of bounce rate as an indicator of your blog’s health. If people come to your website and never dive into additional content you have then you’re missing out on an opportunity to convert a casual web visitor into a loyal reader.

What is a good bounce rate?

Before we dive into ways to analyze your own bounce rate we should first establish what a good bounce rate is. Based on my research I generally shoot for under 40%, but it all depends on the type of blog or website you have. Whatever your target, it’s important to remember factors that can influence higher bounce rates for any website.

Reasons to bounce:

Unattractive website design, Poor navigation, slow load time, website does not meet searchers expectation (i.e. poor content, doesn’t answer their question), too many annoyances on the page (i.e. pop ups, in text advertising, too many advertising blocks).

Armed with these common reasons why people may leave your blog have you done a good enough job combating them? Do you have a design that’s easy on the eyes? Is it easy to navigate? Does your website load slow? Do you make enough money from the advertising to compensate the annoyance your visitors will face?

How I fight bounce rate:

I use only custom WordPress themes or premium themes and avoid free themes because there are only a few good diamonds in the rough and I don’t care to search for them. I use Click Tale to analyze the primary WordPress theme I use and look for ways to improve on the design based on how users navigate my page – they have a free account program worth checking out. You can also just search for “website navigation best practices” and use the feedback to improve your existing blog’s navigation. I then use Google Webmaster tools to determine my page load time and Page Speed to see which resources create a longer loading time. You may find some WordPress plugins cause a huge bottleneck in page load. I am also a huge fan of caching plugins like this one to decrease load times.

I address all of the above steps because my overarching goal is to get a web visitor to read multiple blog posts and spend as much time on my blog as possible. As long as my content is high quality and engaging then the longer a person stays on my blog the more likely they are to subscribe to it. So what I do is display a mixture of both partial and full blog posts depending on the length of article and topic focus. The way to determine which you should use is simple. Does including a break in the story make a user want to click through? If I believe that it does than I will include a break after introducing the concept in the blog post and setting the hook that incites a user to click through.

Wrap Up

The point of analyzing your bounce rate and asking questions like these is to get a quick feel for the health of your blog. Do people yearn for more content continuously clicking through to stories on your blog or do they look for the exit as soon as they land on your blog?

Expanding beyond bounce rate we can look at other key elements of the blogs health which include pages per visit, average time on site and percent of new visits to get a full blog health checkup, but these are topics for another blog post and in the end I believe it all starts by looking at bounce rate first. Here’s a quick test, if you thought this was an informative article than why not visit my blog Make Money on the Internet where I share my experiences as a full time internet entrepreneur? I’ll post a follow up article on my blog that shows the bounce rate stats from you coming to my blog and I can use that data as a way to improve my bounce rate as well.

The following has been a guest post from full time internet entrepreneur Chris Guthrie. You should follow him on Twitter @ChrisGuthrie and visit his blog where he shares ways to make money online.

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When it comes to choosing a topic for a blog there are two popular schools of thought. Some bloggers maintain that you should aim to blog about something you are passionate about. On the other end of the spectrum, many authorities disapprove of this and instead claim you should select a topic to blog about based on it’s profitability.

Today I’d like to examine the arguments from both sides to try and give you a better understanding of your options.

Content Creation

One of the key problems that many bloggers face once they have started to blog is actually how to monetize their writing. After all, while many bloggers are perfectly comfortable writing purely for the joy of expressing themselves and meeting like-minded individuals, many of us, if we’re honest, would like to earn some money from our blogs.

It follows of course that some topics or niches are far easier to monetize. For example if you set up a personal finance blog and manage to build up a significant readership you will likely have advertisers queueing up to sponsor your site. Even if not, there are a range of affiliate programs offering big payouts and even Adsense can pay handsomely in niches such as this.

Speaking as someone who has done exactly this in the past, I can tell you that the financial benefits can be very satisfying. The problem however is that if your chosen topic isn’t something you are genuinely interested in, not only can this lack of enthusiasm spill over into your writing, making for a lacklustre blog, but even worse you may get bored of posting altogether.

Blogging should be a pleasure and having to force yourself to write about something you have little interest in isn’t for everyone, irrespective of the potential financial gains.

On the flip side, should you choose a topic you are passionate about then creating content can be both easy and ejoyable. But if you’re not making much money from your writing is it really worth your time? Only you can decide.

Time Management

It has been claimed that if you blog about a passion of yours, you may struggle to delineate between work and play. You may spend so long working on your blog that if you worked it out, your hourly rate would be better if you flipped burgers at McDonalds.

However is this necessarily a bad thing?

Numerous studies of highly successful people show that this group of people often struggle to find the line between work and fun because to them they are one and the same thing. If you love dogs and you naturally spend time on dog forums discussing them, then if this can help to build your own blog at the same time, what is the problem?

Furthermore, if you are running a blog on a passion or interest of yours, then the content for posts will come naturally to you. You could just be out doing your hobby and suddenly think “ah, this would make a good blog post”. Often ideas come to you spontaneously.

On the other hand you’re likely to be far more efficient with your time management if you are creating a blog based purely on a profitable topic. You’re likely to set out to write an article, get it completed as quickly as possible (to get it over and done with) and then shut down your computer to do something else. So you may find you have more free time *and* money. And you can always use this free time to indugle in your passions outside of the blogosphere.

Pleasure

Pleasure is a difficult beast to put your finger on but let me try to define my meaning a little further. Quite simply, how much do you enjoy running your blog and all the tasks that involves?

Making a profit is nice, but isn’t a major part of the “internet dream” to be doing something you love?

How wonderful must it be to wake up each morning full of enthusiasm, energy and ideas rather than simply dragging yourself into the office because you know that you *should* be working rather than because you *want* to?

Running a blog on a topic you’re passionate about will likely be far more of a pleasure for you than running a blog on bad credit mortgages, though the money you could earn from a profitable niche may enable you to do things that simply wouldn’t be possible if you just followed your passion.

Profits

Many of us would like to earn a living from our blog, but quite how much you’d like to earn may impact your final decision on focusing on your passion or potential profits.

Earning some pocket money or even a low monthly wage may be enough to satisfy you if you are immersed in a world you love. But equally you might be keen to try and become a six figure blogger and this is typically far less likely with a blog about bowling than one about household insurance or camcorder reviews.

Networking

Networking – whether that is getting involved with social media, commenting on other related blogs or being active in discussion forums – is a key element to a successful blog.

Social networking in this way can help you to market your content, increase your readership and make new friends and business contacts along the way.

If you’re not passionate about the topic of your blog then you need to ask yourself how much you will enjoy this aspect of blogging. Will connecting with others, sharing content and discussing ideas be a struggle or a pleasure for you?

Will you be able to force yourself to do it at all, or will you simply have to accept the fact that the idea really doesn’t appeal and so you’ll instead try to market your blog using other techniques?

No Right Or Wrong Answer

The goal of this article is not to convince you that one method of choosing a blog topic is better than the other, but rather to delve into the topic and highlight a few important points for consideration. Only you can analyze the topics covered here and decide what is right for you.

Just remember to take your time and carefully consider the options before jumping in because starting a blog is arguably the hardest part of all. Once you have created content, built links and are receiving regular visitors you have an asset that you can leverage and build upon. It would be a shame to put all that work in only to find that you made the wrong decision in the first place.

Richard Adams is the creator of WpSplitTester, a new WordPress plugin that launches today and is designed to help you maximize the affiliate profits from your blog by using effective split testing.

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I had a very simple yet profitable affiliate campaign running. The next step was to try out some of the other e-cigarette companies with affiliate programs. I found another seemingly good e-cig company called GreenSmoke and joined their affiliate program.

I already knew what to do (and not to do) thanks to my prior BluCigs experiment, so I quickly setup my GreenSmoke campaign:

• I registered a domain called BuyGreenSmokes.com
• PhotoShopped a custom frames header for it that made it seem like part of the GreenSmoke website.
• I made the framed header like I BluCigsStore site and got the new site running.
• Immediately posted some Google AdWords pointing towards it.

Since I already knew what to do, within about 1 hour I completed most of this work. When BuyGreenSmokes.com went live it looked like:

So just like the BluCigs page I made, anytime someone gets to this page through my link and buys something, I make money.

Speaking of the BluCigs experiment, whilst I was making the GreenSmoke page and signing up for other affiliate programs, this small little experiment of mine had been working. I had been making 1-2 sales per day from the Blu campaign, and within a few days here was my revenue:

At this time for every dollar I spent on AdWords, I was making $6 back. So a 6X Return on Investment. At this point I had never seen the product I sold or promoted, didn’t know anything about them and wasn’t particularly “helping” anyone. In fact the people who came through my links never knew who I was or that they were coming through an affiliate.

However in about a week I earned my first check:

This is a very simple affiliate experiment, and probably against the rules of most affiliate offers. You see, I’m not ACTUALLY adding any value to the companies whose products I’m promoting. They probably would’ve made these sales regardless if I was in the picture or not.

Now lets say I owned a large forum for smokers to talk about smoking….then I write an article about how great BluCigs or GreenSmoke electronic cigarettes are. If those articles contained affiliate links that people followed then purchased products, THAT would be of great value to the companies….they just made sales they probably wouldn’t have without you.

REWIND BACK to the first post of this experiment, I was talking about why a lot of affiliate marketers seemed shady.

“I can tell them I own a rave store and sell light up stuff online. It’s pretty straightforward, and they can even see the website for themselves. Why were these people acting so shady? They were obviously hiding something or lying about something.”

From this little experiment the answer became pretty obvious: They don’t want competition.

If I told someone “I’m doing this easy affiliate program for BluCigs and making 6X my money” ….what do you think would happen REALLY soon??

That’s right, tons of people copying you. Cool…a little competition never hurt. But what’s different now is since there are other people bidding for your same keywords on your ads, the PRICE GOES UP. Now instead of making 6X my money, I’m down to 2X all of a sudden….and if more people start bidding the price up, I might even start losing money soon.

So all of a sudden I’m making tons of cash, then one week later that same campaign is LOSING money. No wonder people keep their mouth shut.

So the first two questions of my original list of things to learn were mainly answered.

Now I wanted to learn about making a good landing page using Google Website Optimizer. This could be something I could use on my other businesses to make more money. All the while I was learning all these new things, I was still collecting about $100+ per week in commissions from this small-time experiment…. To be continued.

Neville Medhora blogs at NevBlog.com and is the founder of House Of Rave.

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It is always harder to do something by yourself. The more help you have with your venture, the greater the chance that it will be successful. For bloggers, “getting help” comes in a variety of different ways. For many, it simply means going out and finding successful bloggers in similar niches to act as mentors. For others, it means forming relationships with fellow up and coming bloggers to cross promote content. However, one tactic that is often overlooked by many bloggers is blogging within part of a larger network.

Everyone is part of social networks, whether informal or formal. By social networks I don’t mean Facebook, I mean real live social networks which we find ourselves part of in our daily lives. For me, the main social network I associate with is my university, UC Berkeley. For others, these social networks can mean extracurricular groups (such as John’s Dot Com Pho), trade organizations, religious groups, etc. The more resources and members (or influence over others) the group has the more beneficial it will be for you to blog “within this network”.

Now, blogging “within a network” is a broad phrase so to help provide some substance to this idea I will share what I have done and the benefits I have enjoyed through associating my blog with UC Berkeley.

I started CEOB, the College Entrepreneurship Organization at Berkeley, and after recruiting close friends as initial members, worked to grow the group to over 100 members and the largest undergraduate club on campus. (The club was entirely self-funded) I had been blogging about business for quite sometime at my personal blog, AM Beat. Traffic to the blog had been sporadic at best coming from a wide variety of sources. I decided that it would be beneficial to associate the blog with the club.

I worked to promote the blog within the UC Berkeley entrepreneurship community and focus more on entrepreneurship events related to the UC Berkeley community, will still writing content which had wider appeal. This allowed me to use my blog as a networking tool within the UC Berkeley community, allowing me to connect with successful alumni and influential faculty members. It also gave me access to UC Berkeley events and the speakers at these events which proved quite valuable for networking as well.

While UC Berkeley certainly provides a large network to become a part of, even smaller networks can have their benefits. Associating your blog with these networks helps build an additional reader base, builds credibility, and may even allow you to raise some funding.

This post was written by Aditya Mahesh, founder of AMBeat.com, one of the web’s most popular entrepreneurship blogs.

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My favorite method of learning something is jumping into it. I’ll usually start by reading all I can about a subject, then quickly try a real life version of something simple, then something more advanced….an “experiment” so to say.

So I wanted to try an affiliate marketing experiment in order to learn all about this industry. From what I understood, a lot of affiliate marketing had to do with creating effective landing pages and making people want to buy or take action. Basically that means out of 100 visitors to a web page, how many of them can you make buy/signup whatever. Since I run an e-commerce store, this appealed to me. Perhaps learning some of this affiliate marketing could help me increase the effectiveness of my own business.

For the month of October 2009 I decided to embark on this affiliate marketing experiment in my spare time. I first made a written list of things I wanted to learn from it:

• Learn why most affiliate marketers don’t go into much detail about their work.
• Learn more about what all this affiliate marketing stuff is about.
• Learn to make great and effective landing pages.
• Learn how to A/B split test landing pages using Google Website Optimizer.
• Further understand how to optimize paid keywords and conversion rates.

Even if my real life experiment lost money, this list contains some pretty valuable skills that could add much benefit to my own business. So it was decided, the month of October 2009 I would try an affiliate marketing experiment to see how this all works.

Start a Real Life Experiment of Promoting Something

So for the first part of this experiment I decided to try something really simple that could just be a proof of concept….just to if it could work. I wanted to do a simple campaign where I promote an affiliate link over Google Adwords. When someone clicks through to the ad and buys, I get a commission. So long as I spend less to buy the ads than my commissions ad up to, I make money. It works in theory, now to see if it works in action….

Step 1.) I had to find something to promote:

I could have either joined something like CJ.com or ClickBank.com to find affiliate offers to promote or find one myself. I decided to steer clear of the affiliate networks for this simple experiment solely to find something easy to promote without tons of competition doing the same thing.

I had seen some videos about this new thing called “electronic cigarettes” becoming popular in bars, and started Googling. I’m not a smoker, but this e-cig concept seemed like a brand new industry which has the potential to become big, but hasn’t yet.

I did a little research on e-cigarettes and first joined the BluCigs.com affiliate program simply because they had the best looking marketing material and easiest-to-buy-from website (See that link for BluCigs in the previous sentence? THAT’S an affiliate link in action! If you buy after clicking that link, I make a commission).

So now they gave me an affiliate link to place on my advertisements:
http://affiliate.blucigs.com/idevaffiliate.php?id=3257_0_3_1

Whenever you click that link, it takes you directly to the BluCigs website and if you make a purchase after you click that link, I make a commission! Simple affiliate marketing in action. Understand?

I now have something to promote….e-cigarettes…and I don’t even know a damn thing about them.

Step 2.) Get some people to click that link!

I could either make my own ecigarettes site and build up a readership over time, but this is supposed to be a quick experiment, so the best way to get traffic is to BUY IT.

Since e-cigarettes aren’t such a massively popular keyword at this point, the traffic is was dirt cheap. I could pay $0.05 per click and still be in the top results (or only result) for many keywords.

I immediately made a couple of Google AdWords ads and posted them. Here was one of them:

Once again…Whenever you click that sponsored link, it takes you directly to the BluCigs website and if you make a purchase after you click that link, I make a commission! Simple affiliate marketing in action. Understand?

Step 3.) Make some moola

So now I just sit back and waste money on buying traffic to see if I make a sale. I thought this would take longer than it did, but sure enough in about 2 days (or maybe less, I didn’t check) I made my first sale! The BluCigs program gives me 20% of each sale, and it was a $59.95 sale, netting me $11.99 in commission….so far I’d only spent about $0.50 in ads! Pretty good return on investment!

This 24X return on investment was on an extremely small scale, so I was excited to see if that pace would keep up. However if it does, you see how certain people can make lots of money with very little?

A day or two later, I made ANOTHER SALE for $104.95, netting me a total of $20.99 in commissions! Even though this isn’t a whole lot of money, I was excited my dinky little experiment was giving a good ROI (return on investment). Using less than $5 I now made $32.98 back. At this point I still didn’t even really know what an e-cigarette was, but I was making money off them.

Step 4.) Get caught

Google first slapped my hand in the beginning of this experiment and and pulled my ad since cigarette-related terms cannot be advertised. I changed the text so it never says “cigarette” or any closely-related term:

This worked for two days, then Google denied the ad again saying the link-to URL was different than what was advertised (I guess since I had the referral link in it) so they asked me to change it. Unfortunately I couldn’t get Google to accept my ad anymore…..I’ve been doing an affiliate marketing experiment for only a few days and ALREADY I was caught for doing something shady!

Well, Google has a fair policy to ensure quality, so I decided an alternate and perfectly OK way of doing this….

Step 5.) Make my own domain

I bought a domain called BluCigsStore.com (if you recall the actually website is called BluCigs.com, without the suffix “Store”) and made an auto-direct script for the page to forward to my affiliate link. I immediately changed the banned ad to BluCigsStore.com and Google accepted the changes, I was back in business! This cost me about $19 to privately register the domain name (so my name is not immediately associated with it).

A problem I noticed earlier was if people browsed around the internet researching these BluCigs, they would invariably click on several affiliate links. Whoever was the LAST affiliate link gets the commission.

To help improve my odds of being that person, I made a simple frames page (just used a template in Microsoft FrontPage since I can’t even write simple HTML). Nothing shady or illegal about this, and it actually added some value to the customer because it makes it easier for them to navigate. I used Photoshop to make the graphic for the frame header, and FrontPage to create the simple frames page and picture-link the graphic.

Now when you go to BluCigsStore.com you see the normal store with a static header on it that doesn’t move. When you click around the site, that header stays up. If you want to navigate home, it has a button for that. It also has an EXIT button that is a link to my affiliate link:

Using the frame bar on my own browser made it easier to navigate the site for me, so I’m guessing other people probably found it helpful (and probably never expected it was an affiliate tactic…just part of the normal site).

So Google once again approved my ads and I started making more money…. To be continued.

Neville Medhora blogs at NevBlog.com and is the founder of House Of Rave.

Discover the SECRETS I’ve Learned to go from zero a month to over $40,000 a month from blogging. Download Make Money Online with John Chow dot Com for FREE!

Spending a lot of time online I run across the term “Affiliate Marketing” all the time. I even go to an “internet marketing” event once a month here in Austin to meet other entrepreneurs, but always found some of the people doing affiliate marketing a little perplexing (and sort of shady).

When prying into what they do, they never gave me CLEAR answers. They would always say things like, “I do lead generation” or “performance marketing” or “sell an online product” and other buzzwords I didn’t fully understand. I’d ask, “Ok, give me an example of a product you generate leads for” and they’d state a general industry at most (such as insurance, health or real estate). Some of the people said they do “PPC arbitrage” and that they “promote products” but wouldn’t go much further into detail about their business.

I was never satisfied with these responses and just presumed these people were really shady (which some of them are).

So here I am trying to find out what these people do and they keep skirting around the actual details…WHAT THE HELL?

I can tell them I own a rave store and sell light up stuff online. It’s a pretty straightforward, and they can even see the website for themselves. Why were these people acting so shady? They were obviously hiding something or lying about something.

Many of the people I met in the affiliate marketing world seemed to sell herbal pills online or get rich quick schemes for the masses. Most of the products they were promoting seemed relatively useless once purchased, and most had “interesting” billing plans.

In my mind, I saw “affiliate marketing” as referring to a website that promises to get you rich quick…something like this kind of crap:

(You should be PUNCHED if you even TRY to click that image).

I’ve read many bloggers like John Chow and other guys who make their living from blogging and they frequently talk about affiliate marketing. I kept wondering what exactly it was, especially since they correlate so much of their income to it…..so I decided to do some research and find out.

The first thing I did was research the term “Affiliate Marketing” and printed out all the articles I could find. I read them all and took notes on a plane ride somewhere. I read the Wikipedia article and a bunch of other search results, and the most basic idea behind Affiliate Marketing is:

1. Someone is selling a product.
2. You help promote that product.
3. When someone buys a product through your recommendation, you get paid a percentage of the sale.

SIMPLE.

I thought about this for a second and realized there are many successful companies that heavily use affiliate marketing in a non-shady way. These include Amazon, eBay and so many others. Amway and other companies also use an affiliate structure. Even car dealerships to a small extent seemed like “affiliates” of their larger companies.

The easiest example I can give of a super-simple affiliate marketing experiment is my books reviews page. If you click one of those book links and buy from Amazon, I get a small portion of the sale. Amazon is willing to do this because I helped drive a sale to their site through my review. If it weren’t for me, they probably wouldn’t have made that sale.

So THAT was affiliate marketing??

Not completely.

A lot of people I met talked about buying ads to promote their affiliate products….this was part of the term “Pay-Per-Click Arbitrage” I heard so much about. Some of the more intelligent people in the internet marketing group I attend made a lot of their money this way. I found out what some of these people do is:

• Signup for an affiliate program for a product.
• Buy ads on Google, Yahoo, banner ads etc promoting these products.
• Clicks get sent directly to the product page or their own webpage promoting the product.
• Whenever a sale is made from that action, they get a percentage of the sale.

This is a frequently touted method of getting rich quick by many crappy eBooks out there. In essence it makes sense. For Example:

• If you buy paid clicks from Google costing $0.10/click…..
• You send all that traffic to a webpage that offers an affiliate product/service/signup…whatever.
• That service pays you $2 per transaction that succeeds.
• If 1 out of every ten people completes that offer, that costs you $1.00 at Google.
• So for every dollar you spend, you make two dollars.
• So long as your spending is less than your earnings, you’re making money.

The math behind this actually works, and some people legitimately make a lot of money doing this….and that’s why people buying get-rich-quick schemes believe in these methods.

I thought this affiliate marketing world was a good model at its essence, so why was everyone I met in this world always so shady? If these people were making money doing arbitrage, why didn’t they share details?

Just like the bottled water idea or homeless experiment, I decided to find out by simply trying it out…. To be continued.

Neville Medhora blogs at NevBlog.com and is the founder of House Of Rave.

Discover the SECRETS I’ve Learned to go from zero a month to over $40,000 a month from blogging. Download Make Money Online with John Chow dot Com for FREE!