Determine the potential of your affiliate project with this formula

However, I can share with you the math I use myself to determine if there is potential in a particular niche. To use that math, you need the following things:

1. An estimate of the total volume of your keywords
2. An estimate of how well you expect to score
3. An estimate of the percentage of people who click through to the advertiser(CTR)
4. An estimate of the advertiser's conversion rate
5. Advertiser's average order value
6. The commission rate

Disclaimer: this is really just an easy calculation. There are so many variables that have an impact that it's really almost impossible to calculate whether an affiliate project has potential. 

1. An estimate of the total volume of your keywords.

The volume of a keyword is how many times on average that keyword has been searched for per month (in the past 12 months). Suppose a keyword has a volume of 1000, then on average that keyword is searched for 1000 times per month.

Suppose there are 100 keywords in your market and all these keywords have a volume of 100, so the estimate of the total volume is 10,000.

2. An estimate of how well you expect to score

This is by far the most difficult estimate to make, because you can hardly tell.

If you rank in spot one in Google, you will grab between 25% and 60% of the clicks. This varies by keyword.

Suppose you rank on average in spot 6 with all your keywords, then you grab a few percent of the clicks. We'll assume 5% for now.

That means that with the earlier example of 10,000, you will grab about 500 clicks per month (5% of 10,000).

3. An estimate of the number of people who click through to the advertiser (CTR).

Not everyone who lands on your website will click through. This depends on the design of the website, the number of buttons and how good the content is.

With my website Turkesterone.co.uk, about 30% click through to our advertisers' websites. That's pretty high, I know. But we're going to keep that 30% for the example anyway.

That means about 150 people will click through (30% of 500).

4. An estimate of the advertiser's conversion rate

Of course, the 150 people who land on the advertiser's website will not all buy. Some people are simply just looking, some have yet to discuss it with their partner, etc.

You can easily find out the advertiser's conversion rate. In fact, you can just ask. You can often find out from the advertiser what the conversion rate is of people who came in through affiliate marketing.

This rate is probably between 1.5% and 8%. Where 2-3% is very normal and 8% is exceptional. The latter is on some days the conversion rate at Bol.com (at one of my affiliate websites).

We will assume 4% for the moment here. That means 6 people will make a purchase (4% of 150).

5. Advertiser's average order value.

The average order value is the number of euros someone spends on average at the advertiser. You don't have to find this information out yourself, because you can request this again from advertiser. Ask really specifically if he can indicate how much affiliate visitors spend on average.

Suppose this is €150. Then that means this will give you €900 revenue per month (6x€150).

6. Your product's commission rate

You also know the commission percentage in advance. You can find it in the affiliate marketing network. Suppose your commission is 8%, you will earn €72 (8% of €900) per month.

Suppose it took you 400 hours to accumulate that, then on average (per year) you earn €2.16 per hour (72*12 = 864. 864_400=2.16).

And, of course, that's not a fat lot. But you assume that your project will continue to grow constantly, rising in Google and bringing in more and more visitors - and therefore more sales and commissions.

Beforehand, however, it is important to do this math once. Because then you will know the potential of your project.