Friday Free Business Idea: Amazon.com Arbitrage

October 6, 2006 - Get free updates of new posts here

I was doing some Google searches for books and I noticed a few sponsored results from Amazon.com. I thought it was interesting that they were buying text ads to link to their site. I checked out the code on the advertisement and realized that some 3rd party was buying Amazon ads and adding an affiliate link to the book. Here is an example:

amazon advertisements

Opportunity: The commission you get from an affiliate sale is greater than the cost per click to Google for the advertisement.

Calculations:

Affiliate Commission: 4% per $15.00 book = $.60
Google Cost: $.02 per click
You get 5% conversion for every 1,000 clicks which is 50 purchases.

Total Revenue: 50 * $.6 = $30
Total Cost: 1,000 * $.02 = $20

Profit: $10

Seems like a simple way to make money to me. As always, a burrito will suffice if you do this idea.

Leave a Reply

Your email address will not be published. Required fields are marked *


11 responses to “Friday Free Business Idea: Amazon.com Arbitrage

  1. Lazy Man and Money Reply

    I read about this in Business 2.0 over a year ago I think. The author bought the link for the Calvin and Hobbes. Being a $120+ book, I think the commission was nice and he made some good money.

  2. jonathan Reply

    the hard part is finding the keywords that are cheap per click – and the wrong keywords will yield a lot of clicks but no buys. the market is efficient.

  3. Jason Reply

    Thanks for sharing the tip, Noah ^_^

    I agree with Cameron, this is instead a big business.

    Question: can u still get $.02 per click on Google AdWord? Maybe I was wrong on this, but I thought the minimum is $.05 now? Also, can you still get 5% coversion rate nowdays?

  4. Ray Dotson Reply

    It apparently is something that some people are able to make boatloads of cash with, but it’s definitely not as easy as it looks. I’ve played around with this sort of thing and it’s clear that many thousands of impressions don’t necessarily mean any clicks at all, not to mention conversions. There a lot of people out there trying this with all sorts of different affiliate programs, though.

  5. Marco Reply

    This strategy worked before everybody knew about it.

    The minimum has been 5 cents for a while now.

    Too little gain for the amount of work needed. But I guess if you struck it lucky and found the perfect keyword that no one else is monetizing then perhaps it would be worthwhile.

  6. Joseph Hunkins Reply

    First, great for you to actually do the math. Most don’t, and lose a lot on PPC.
    The idea that people are “making millions” with PPC is … very suspect. Jonathan is right that the market is becoming more efficient. Also, in my sector (travel), there are many, many bids that appear to carry a negative ROI – these companies feel they must dominate the market for many keywords so they are OK losing relatively small money to protect themselves against the millions of small online ventures.

    Many who “make” thousands per month are also spending thousands per month, though I think it’s true there are still some clever “click arbitrage” masters who do very well. I’ve assumed they spend a lot on PPC – probably tens of thousands weekly, and do extensive and complex analysis. Risk should be rewarded, and sometimes it is.

    Interesting how many here don’t even know that Google minimum CPC is no longer .05. However they jerk you around mercilessly for many terms, asking you to “improve the listing” or pay much higher CPCs.

  7. Michael Reply

    Great free tip Friday update … and even better discussion. Strangely enough, at my local Borders store they still don’t have the pick for purchase … Maybe I’ll contribute to the merchant’s take.