Affiliate marketing can be a rich gold mine. If you can find a phrase to bid on that somebody ready to buy the product you are marketing is likely to search for, and there is a high frequency of searches for that phrase, you may find that you will build up huge revenues very quickly indeed!

If only life was that easy! Part of the problem is that pay-per-click marketing is extremely popular, both with affiliates and the vendors themselves. You are bidding against other advertisers to get your ads displayed on the search engine networks, and it's very easy to spend more than you earn. Thats why you have to monitor your advertising campaign very closely.

You need to know a small amount of statistics to succeed as an affiliate marketer. It's fairly obvious that you need the amount of money coming in to be greater than the amount of money going out, and you also want the rate of increase of your income over time to be as high as possible. However, beware of exaggerated claims of high return-on-investment (ROI) that you will often see from affiliate marketers on forums. A typical case would be an affiliate that has just made one sale; they've made themselves a commission of $20; and they paid Google $0.13 for two clicks. They'll claim a ROI of about 15300%, and, for this isolated case, that is true. Chances are, the affiliate just got lucky when they got their first clicks through. That's why you need to leave your campaigns running for quite a few clicks to get a good idea of the conversion rate of a product, that is the rate at which visitors convert into leads or sales. Typically it may be of the order of 1-2%, but figures can vary wildly, depending on the quality of the product and how good the sales page and process are. The conversion rate will of course be the number of sales divided by the number of clicks, and it's quite easy to work out.

Conversion rates will usually vary for different keywords, and they can also vary depending on the text of your ad, so it's a good idea to track the conversion percentage of each keyword and ad individually. For example, it's fairly obvious that somebody searching for "word processor" is more likely to purchase Microsoft Word than somebody searching for "free word processor". Most cases are not this obvious. You can then, over time, find out which keywords convert into sales for you, and which do not.

Sometimes, you may find that you have found a keyword where users entering that keyword convert to sales or leads successfully and frequently, but the cost of bidding on that keyword is too much for you to make a significant profit, or any profit at all. You can often bid on variations of that keyword, such as misspellings and missed spaces, which will help reduce the cost per click because these phrases are not bid on by as many pay-per-click marketers.

With some affiliate networks such as ClickBank, it can be difficult to know which keywords convert into sales well. The Google AdWords interface allows merchants to place code on the page that is viewed immediately after purchase on their site, and if the merchants you promote are prepared to do this for you, you are more likely to be successful promoting that programme.

With Commission Junction, you can place the keyword in the Shopper ID parameter, and it will be shown next to any sale that results from that keyword being entered.

Ideally, you should look for merchants that realise the value of their affiliates; they simply represent the sales team of the product! It's surprising how many vendors are out there that have affiliate marketing networks and yet do not value their affiliates.

Whats really good about this business is that once you have come up with an advertising campaign that consistently makes money, all you have to do is to monitor it, maybe once a week, or however often you feel comfortable with. You then have a campaign that generates income for you, practically on autopilot! Keep on setting up successful campaigns and you will eventually make a significant income from this approach.