PPC is a Dead-End Strategy for Affiliates

Affiliates should exit the PPC market as quickly and efficiently as they can. Here's why:

1. Barriers to entry in PPC are incredibly low. If you're working in a space that has decent payouts you either (a) have lots of competition -- which means small margins; (b) are in a really small niche -- which means a relatively small upside; and/or (c) are about to get lots of competition as other PPC affiliates test your niche and discover that it has good margins.
   
2. As an affiliate, every conversion has a relatively small lifetime value. (I see this all the time in life insurance -- a single conversion might be worth hundreds of dollars over its lifetime to MetLife, but only $13 to me. There's simply no way I can compete with the 300+ life insurers (not to mention potentially thousands of insurance agents and the networks that funnel leads to them) in the PPC space.
3. You have no long-term competitive advantage and no assets. On the technology side, let me describe the ultimate technology to you: you know on a keyword-by-keywords basis how much a click costs you, how much it's worth to you, and a pretty good estimate of how much more traffic you could get if you increased the amount you spent per click. You're able to tie those three pieces of information together programatically, so that you maximize your profits. Here's the problem -- lots of companies figured this out 3 or 4 years ago, and they're busy expanding this formula to every niche they can find. Their technology is more robust, more scalable and better designed than whatever you will throw together in the next couple of years. They've already tested and wrung advantage from the next 10 niches you think of, and they've negotiated better payouts on their conversions.

Mini strategies that might buy you a bit more time:

• Get some of your PPC traffic to subscribe to your email list. Good idea, but it still won't save your bacon -- you'll probably lose them as a conversion in the immediate term, thereby driving up the average cost of your traffic, and running a successful email list takes actual work.
  
• Hope that some of your PPC traffic will link to your site, thereby sending you more organic traffic. Yeah, not likely on the a/b tested, limited content landing page you just sent them to. Either (a) your landing page solves their problem so that you make no money from them but 1 in 1000 might link to it; or (b) your landing page convinces them that they need to buy a product to solve their problem, so they leave your page and link to the wonderful product or service that you just pointed them to.

Of course, I don't mean to sound like an idiot -- PPC is great for lots of folks. For example, the folks you're acting as an affiliate for, for example. They make a lifetime value from each conversion 10x what you make. They're reinvesting in an actual business that solves people's problems. They're getting better and better at converting their visitors, so their cost per lead probably stays relatively stable as increasing PPC competition drives up their prices. They reinvesting the money you've earned them into building a bigger affiliate network, meaning that you are less and less important to them, and are subsidizing their attempts to reduce your margins. You're just the sucker that sends them cheap conversions between now and when you're run out of business.