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I have a review site that reviews a certain category of software. I have set up affiliate links for many of the products, and make a percentage of every sale that happens as a result of that link.

However, one vendor contacted me and said they don't have an affiliate program but are willing to Pay-Per-Click. He then asked me what my Pay-Per-Click rate is.

Well, I don't have a Pay-Per-Click rate and I don't have the foggiest idea of how to figure out what rate to ask him for that would be reasonable.

How can I figure out a reasonable rate?

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One approach for a starting point would be to see what Google could charge, then start negotiating. You might also ask him what he's paying elsewhere.

Also, if you've got affiliate relationships set up with his competitors on your site, I would assume you have some conversion data you can use to do calculations, right? e.g. take the average conversion rate of your other relationships and apply it to this guy, assume charging a similar percentage to what other folks are paying and calculate backwards (i.e. divide that amount by the average number of clicks to get there) to see how much you should charge per click.

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Thank you for that good idea. I used the typical affiliate rate I'm getting in terms of per click with them, and quoted that value. The resulting value seemed reasonable. – lkessler Jul 2 '11 at 14:25
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Since your new to affiliate marketing, what I would suggest is to take free lessons on SEO & PPC, it has worked for me and saved me tons of money I would have been spending on google Adsense.

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