Have you heard about affiliate marketing, but don’t really understand what it is, or how it works? Maybe you want to start an online business, or expand your existing one. Is affiliate marketing worth considering as a good way to make money online?
- What is Affiliate Marketing?
- How Does the Affiliate Marketing Process Work?
- What is a Successful Referral?
- How Do Affiliate Marketing Commissions Work?
- What is an Affiliate Marketing Network?
- The Importance of a Niche in Affiliate Marketing
- How to Promote Products as an Affiliate
- Does Affiliate Marketing Really Work?
- How Much Money Do Affiliate Marketers Earn?
- The Pros of Affiliate Marketing
- The Cons of Affiliate Marketing
- Conclusion
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What is Affiliate Marketing?
Affiliate marketing is the process of promoting a product or service owned by somebody else. In return, the product or service owner pays the promoter (affiliate) a commission for each successful referral.
In its simplest form, there are 3 role-players in the process. As you will probably come across a few different names for each of them, I will define them for you.
- Merchant:- This is the product owner or seller of the product or service. Marketers sometimes call this the Advertiser. For the sake of simplicity, I will refer to the advertiser in this article as the Merchant.
- Affiliate:- The affiliate promotes the product to an audience and sends customers to the merchant’s website. The marketing term for the affiliate is Publisher. Remember that all content publishers are not necessarily affiliate marketers.
- Customer:- This is the potential buyer, or consumer, of a product or service.
How Does the Affiliate Marketing Process Work?
When you choose a product to promote as an affiliate you receive a unique link from the merchant. This link identifies both you and the product you are promoting.
You direct potential buyers to the merchant’s website by getting them to click your affiliate link.
This infographic describes the affiliate marketing process in 4 simple steps
Typically, the process begins when a potential customer uses a search engine to locate information about a product, a service or a topic.
The search action produces several search results, including a link to content that you created to promote your chosen product.
Let’s say that your content is in the form of a product review. By clicking on your search result the customer is sent to your review.
When you created your review, you would have placed your affiliate link somewhere within your content. If your review persuades the customer to buy the product, he might click your affiliate link.
That sends the customer to the merchant’s website. There, the customer hopefully completes the sale, or another referral action, which entitles you to your commission.
What is a Successful Referral?
In practice, there are several ways a referral can be deemed to be successful. The merchant usually specifies this before you embark on any promotional activity.
Pay per Sale:- This is by far the most common affiliate arrangement. A confirmed sale resulting from your referral entitles you to receive a commission.
Pay per Action:- Sometimes known as Cost per Action (CPA). This means that you receive compensation when your referred customer completes a specified activity. This can be any number of things ranging from providing contact information or signing up for a newsletter, to installing an app on a phone. A sale is not required because the merchant is paying only to acquire a lead or prospect.
Pay per Click:- This type of compensation rewards you for referral traffic that you route through to the merchant’s website. Your referral is not required to purchase a product, or take any action other than to visit the website.
How Do Affiliate Marketing Commissions Work?
Single or Recurring Commission
Commissions can be payable once only, or multiple times.
Products which require recurring payments or subscriptions usually pay recurring commissions too. These often keep paying for as long as the customer pays for the product or service – sometimes for life.
Cookie Duration
The time that elapses between the click on your affiliate link and the completion of the required action is also important.
When your referral arrives at the merchant’s website, the site places a small file called a cookie on their computer. The cookie records the date and time of their visit.
If the referral completes the required action within a predetermined period, then the merchant pays the commission to you.
The cookie duration can be as short as the length of a single online session, or several months long. Some cookies never expire.
The merchant determines the duration of this period.
Affiliate Marketing Commission Rates
How much commission do affiliate marketers earn?
Affiliate marketing commission rates cover a very wide range – anything from 1% to 75%, sometimes even more.
Physical products generally earn commissions on the lower side of this range. Digital goods, like software or some online services, usually command the higher commission rates.
For example, most of Amazon’s sales are of physical products. Their Amazon Associates program pays non-recurring commissions between 1% and 10%, but their cookies only last 24 hours. Unusually, you receive commission for any sale made to your referral during this period, not just for your referred product.
On the other hand, a software marketing tool, like GetResponse, pays affiliates 33% recurring commission and has a 120-day cookie.
What is an Affiliate Marketing Network?
Many merchants are focused on managing their day-to-day business operations. They don’t always have the time or the resources to manage their affiliate programs as well.
Affiliate marketing networks perform that function for them, for a fee.
Affiliate marketing networks screen, assess and approve or reject affiliate applications from publishers.
When they approve an affiliate, they provide access to the merchant’s marketing materials. They track the affiliate’s performance and record and pay any commissions earned.
The networks act as connecting points for many merchants and affiliates. This allows them to provide additional value to both parties that would not be possible outside of the network.
For instance, affiliates can search the network’s database for suitable merchants instead of having to locate them individually. At a glance, they can see product, commission, support and other details for several merchants at a time.
Using an affiliate marketing network’s services allows merchants to reach a far greater number of affiliates than would otherwise be possible.
The Importance of a Niche in Affiliate Marketing
Identifying your niche is essential to the success of your business.
Why Is It Important to Have a Niche?
- It helps you to define who your potential customers are and makes it easier to market to them.
- Knowing your niche helps you to know where to find your audience, what they do and where they hang out.
- It makes it easier for your audience to find you
Ideally, your niche should be as narrow as possible.
That sounds counter-intuitive, but when you start out in affiliate marketing you are always at a disadvantage against established competitors. The best way to gain a foothold in the market is to specialize.
Over time, your audience, influence and authority will grow. You will gradually become better positioned to widen your focus and compete against the bigger guys.
How Do You Choose a Niche?
Choose a field that you are really passionate about.
Having enthusiasm for a particular subject drives you to learn more about it. You tend to want to try related products, to become knowledgeable and develop strong opinions on the topic.
More importantly, it builds a desire to share what you know with others. In other words, it makes it easier to regularly produce content that will attract an audience. That’s an essential requirement for an affiliate marketer.
Refine and Narrow Your Niche
Make your niche as specific as possible. If you are using a website to deliver your niche content you ideally want Google to place your content on the first page of its search results.
That’s unlikely to happen if your niche is wide and you are producing generalized content. Your competition will walk all over you.
For example, you are more likely to attract a relevant audience if your niche is Dachshund dogs, than if it was pets. It’s very possible that you will still have competitors in this niche, but the probability of your content ranking in Google is much higher.
How to Promote Products as an Affiliate
There are many ways to produce content that you can use to promote affiliate products. Bear in mind that affiliate marketers often use more than one way to promote products.
Blogging
Blogging gives you the opportunity to endorse certain products from time to time. You can leverage the familiarity and trust that you build with your audience over time to influence their purchasing decisions.
Tempt them to buy the product through your affiliate link, instead of elsewhere, by offering additional value to your offer. Affiliate marketing is one of several ways to monetize a blog.
Choose to create a blog by creating your own brand, on your own website and domain. Or you can use a free blogging platform instead.
Product Reviews
Reviews and product comparisons are a common way to attract potential customers to affiliate content. If your content fulfills customers’ information needs, you can persuade them to purchase the reviewed product through your link.
Offer product reviews on your own dedicated review website, on your blog, or in a YouTube video.
Free Educational Content
Tutorials or how-to guides attract visitors looking for solutions to their problems. If you can help them, you have an opportunity to recommend products that you use or mention in your content.
Subject-specific websites, blogs and YouTube channels are good outlets for this kind of material.
Paid Courses
Compile and sell paid online courses and, within the course content, you can promote affiliate products related to your courses. You can even promote products or tools that you used to create your course content.
The affiliate products can be either the secondary or primary income source, depending on how you price your course material.
You can offer your courses through dedicated course providers like Udemy, or from your own website or YouTube channel.
Offer a Free Product or Service
A large-scale example of this approach is the way that many free stock-image sites work.
They allow uploads of images which are freely shareable with others. When you search a site, the search returns free images alongside links to related paid images at another site.
Visit Pixabay to see an example of this in practice.
There are opportunities for you to apply this affiliate model on a smaller scale, for different products.
Price Comparison Sites
This is another large-scale example of affiliate marketing. These websites present related products, and their prices, from various merchants. Customers have the convenience of comparing prices and features in one place. If they make a decision to purchase, they can select the desired product and visit the merchant’s site through an affiliate link.
Email Marketing
Build contact lists for your target audience and promote affiliate products to them through periodic Email campaigns. You can use Email marketing on its own but, more commonly, you would use it together with other marketing channels.
Paid Advertising
Social Media Influencers
Like bloggers, influencers have the opportunity to market products to their followers. They can profit from any affiliate commissions that may result. Just like bloggers, influencers usually have multiple monetization methods to choose from. YouTube, Instagram and Twitter are popular influencer platforms.
Does Affiliate Marketing Really Work?
The short answer is YES, affiliate marketing really does work. To illustrate this, let’s first look at the market potential.
Size of the e-Commerce Market
There are 4 billion people online today. In 2020, 2 billion of those people bought goods and services online. That’s one quarter of the world’s population. The value of those sales was $4.2 trillion (Statista).
A market of that size offers plenty of opportunity, and it is still growing.
Growth of the Affiliate Marketing Industry
Another way to gain insight into affiliate marketing is to assess the impact of the industry.
- According to Statista, the affiliate marketing industry will be worth $8.2 billion in 2022, in the US alone. That is triple what it was 10 years ago.
- A report commissioned by Rakuten shows that 81% of brands now use affiliate marketing, as do 84% of publishers.
- 85% of all online shoppers visit Google for information before they make a purchase. That makes them prime opportunities for affiliate marketers.
- Amazon Associates is the world’s largest affiliate program and in 2010 reported that it had 900 000 affiliates worldwide.
- In 2014 it was reported that the Amazon Affiliate program was being used by 1.2% of all websites. In that year there were almost a billion websites (Internet Live Stats). If we assume that only 20% were active sites, that would mean that almost 2.5 million websites in that year used Amazon’s program.
- Google Trends data shows that interest in affiliate marketing continues to grow strongly, year after year.
Affiliate Marketing Search Interest
Google Trends shows that search interest in affiliate marketing has doubled since 2017.
How Much Money Do Affiliate Marketers Earn?
The answer to this question is clouded by a few things, and some of the income statistics that I will present appear to be contradictory. Bear the following points in mind when you read them.
Firstly, many affiliate marketers start out making zero income. That’s because they must first build up a pool of content large enough to attract good amounts of traffic. It can take 6 months to a year, before significant income starts to come in.
Secondly, for many publishers, affiliate marketing is a secondary income stream. They often don’t pay much attention to developing it to its fullest potential. This probably skews affiliate marketing income statistics to some degree.
Finally, there is little doubt that several affiliates earn an excellent living from their marketing efforts.
- According to Inc.com, on average 20% of publishers’ annual income comes from affiliate marketing.
- 9% of affiliate marketers make $50,000 annually (VigLink).
- According to Glassdoor, affiliate marketers earn an average of around $65,000, with the low end of the range at $42,000 and the top at $83,000.
- Payscale’s data places the average at about $51,000, with a low at $37,000 and a high of $71,000.
- 12% of affiliate marketers generate $75,000 in affiliate income alone (Mediakix).
- One of the world’s most successful affiliate marketers, Pat Flynn, makes around 60% of his $170,000 monthly income from affiliate marketing (foundr)
- Established blogger Ryan Robinson frequently shares his income reports. These break down his various income sources and show that he regularly makes more than $17,000 just from affiliate income – every month.
The Pros of Affiliate Marketing
- Work anytime and anywhere. You can work from anywhere you choose, and at times that you set. All you need is internet access.
- Low cost to entry. Affiliate programs are free to join.
- It is easy to learn. Take a course to learn the concepts and techniques. They are easy to grasp.
- Low running costs. The commonest approaches in affiliate marketing are affordable.
- No need to create or handle products. Choose a product or service that already exists. Stocking, shipping and handling products and returns are all managed by the merchant.
- No need to deal with customers. You handle questions about your content that visitors to your website might have. All other customer issues and complaints, if any, are the merchant’s responsibility.
- Potential for passive income. This depends on how you market your products. You can earn recurring income indefinitely from a single piece of work.
- Complements other business activities:- You can often use affiliate marketing as a way to increase the income from your existing business.
- Easy to scale:- Introduce additional affiliate products to your existing audience without requiring additional help or resources.
- Performance-based income:- You are not constrained by what your employer thinks you should be paid. If you put in the work, the sky is the limit for what you earn.
- A good side hustle:- There is little likelihood that your affiliate marketing activities will interfere with your full-time job. That makes it an excellent part-time business to run if you are already employed.
- Your assets grow in value:- Your affiliate marketing website or blog is a business asset. As in most businesses, this asset increases in value over time as the business grows. Eventually, you can sell it for a profit.
The Cons of Affiliate Marketing
- Time:- It takes time to build visitor traffic or audience size sufficiently to generate meaningful income. Periods of 3 to 6 months, or longer, are common. In that time, affiliates receive little or no income. Paid advertising can reduce this time, but adds to your costs.
- Competition:- Affiliates sometimes promote similar products and compete for the same audiences. Sometimes they even compete for approval as affiliates for a product, if it is very popular.
- Limited control:- If your merchant sells a poor-quality product, or handles the sale badly, it can reflect poorly on you. It’s a good idea to get to know your product and merchant before you stake your reputation upon them. The merchant can also restrict you from promoting the product in certain ways.
Conclusion
Affiliate marketing is a legitimate way to earn an income online. This is borne out by the growing number of affiliates, and merchants with affiliate programs.
As more people spend increasing amounts of their income online, the opportunities for affiliate marketing grow accordingly.
Affiliate marketing concepts are easy to understand, and to apply. It is an easy field of business to enter, but requires time and effort before it generates good, steady income.
If you are prepared to put the work in, and don’t mind being a little bit patient before you see the rewards for your efforts, the amount of income you can earn is practically limitless.
Do you want to set out on your own path towards financial independence? Want to know where to get the best training and the best start for your new affiliate marketing business?
I recommend Wealthy Affiliate unreservedly. I got my training in affiliate marketing with Wealthy Affiliate, and used their platform to start my first online business in 2018. Today, I am still a member.
They place success at your fingertips and really provide you with all that you need, under one umbrella. You can read my review of Wealthy Affiliate here.