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Copyright © 2004 Howard Young
When eBay sent an e-mail to all of its Commission Junction Affiliates that its top affiliate was paid over 1.2 million for December 2003, I hurriedly ran to Post Office to see if my check was there. It wasn't there, of course, nor was "the check in mail."
Considering that eBay pays $0.05 per "Buy it Now" or bids and $5.00 per active registration, you can visualize massive amount of traffic one affiliate had to send to eBay to receive a gross revenue of 1.2 million.
We can only speculate spread between bids and registrations, but for simplicity sake, let's only review higher payoff of registrations. eBay has a seven-tiered active registration program starting at $5.00 and increasing to $16.00 as you register more users. The second tier -- or breakeven point -- starts at 250 registrations where registrations increase to $8.00.
The metrics collected by Commission Junction indicate that conversion rate for eBay is about $5.00 per 100 clicks or $0.05 per click. Coincidentally, this is lowest price you can bid for an ad on Google Adwords.
After you register your first 250 eBay users, your gross revenue is $1,250 while your advertising costs are $1,250 -- a net profit of zero. With your next 250 registered users, your gross revenue increases to $3,250 while your Adwords cost only increases to $2,500 for a net profit of $750.
If you solve all equations, you'll find that to gross 1.2 million it takes roughly 76,360 active registrations. Moreover, if affiliate used Google Adwords to generate traffic to eBay, advertising costs were about $381,800 with a net profit of $818,200.