I was trying to see how people make this work, So..
I put together a simple little spreadsheet that calculates the break even point for a campaign based on $/click, conversion rate, budget / day, product commisions, and number of days.
It clearly shows that you need to have a rough idea of a conversion rate (yes this is dependent on keywords, ignoring that for this discussion) and the amount you make per sale. You don't want to spend $100 on ads to make a $20 sale.
I guess another way to look at this is what % of sales should be spent on ads? (lets not talk about free, lets assume for this discussion that you have committed to ppc ads) Is it ok to spend $100 to make $400 or 25% on ads?
Just wondering what people average spending on a typical campaign for say a affiliate product or a new website? And what their typical conversion rate is? How long do you run your ads?