What is affiliate marketing?
Affiliate marketing is an online business where you earn money by promoting a company’s products or services (the vendor) through your website content or social media channels in your role as affiliate publisher.
The amount earned is typically a percentage of the sale, ranging from 1% to 100%. This is often referred to as the Cost per Sale (CPS) affiliate marketing model.
An affiliate publisher can also earn a fixed amount for each sale they make of a product or service. In the most lucrative niches (mattresses, real estate, lawyers) this can be several hundred dollars per sale.
CPA (Cost per Action) is when an affiliate publisher is paid a fixed amount per sale.
So, you get paid for acting as the middleman between the buyer (consumer) and the seller (vendor) – you refer potential customers to a business selling the types of products they’re interested in.
That’s why some people prefer to call affiliate marketing “Referral marketing” because that’s basically what you’re doing.
But you never, ever have to hold inventory of stock, handle shipping or even deal with customer service queries – all of that is taken care of by the vendor.
Which means you’re left free of 99% of the headaches involved with a “normal” business or any type of franchise.
Why do companies use affiliate marketing?
This is a question I get asked all the time – Why on Earth would big companies allow people they don’t know to promote their products or services?
Because they only have to pay affiliate publishers when they make a sale, so it’s 100% performance based.
This is unlike say a traditional sales role in a company where you’re paid a basic salary (enough to live on) but the rest of your income is commission based.
With affiliate marketing these companies don’t even have to pay you a basic salary. Or provide for medical or contribute to your 401k.
Affiliate marketing means any company can take advantage of a sales team made up of thousands of eager affiliate publishers – eager because they want to make money and they’re willing to work for it.
And sure, 90% of affiliate marketers will only bring in spare change in terms of orders and revenue. But the other 10% can easily contribute tens of millions of dollars to a company’s bottom line.
Basically, this is a no-brainer for most businesses.
What are the basics of affiliate marketing?
Okay, so far we’ve covered the basics of how affiliate marketing works i.e. you refer potential customers to a business and they pay you for doing that.
Or to put it in bullet points:
- You choose a topic for a website
- You build the website
- You publish content to that website
- You sign up for an affiliate program
- You place the affiliate links within your content
- If a visitor clicks on one of those links and then then makes a purchase, you receive a commission.
What’s also worth mentioning is that in affiliate marketing there are several relationships to be aware of:
Affiliate publisher – this is you
Vendor – this is the company (often referred to as a ‘merchant’) whose products/services you’re promoting. They can be huge brands or small companies that either operate an in-house affiliate program or use an affiliate network
Affiliate network – these are companies that manage the affiliate marketing programs for anywhere from a few dozens to thousands of different businesses. Some of the bigger affiliate networks out there include Commission Junction, ShareASale, Awin, and Rakuten Marketing.
Affiliate manager – this is the person who manages the affiliate program for an in-house affiliate program or is your point of contact on an affiliate network. These are the people you can ask about payments, upping your commission rate, or any other questions you might have.
Not all companies use affiliate networks though.
Some businesses only operate an in-house affiliate program, while others use a hybrid approach of offering an in-house program but also work directly with affiliate networks.
I’ve never met anyone who wanted to get involved in affiliate marketing for the good of their health i.e. they weren’t interested in how much money they could make, or how often they’d get paid.
With affiliate marketing you will receive payment from the vendor or affiliate network anywhere from every week to one every 3 months (Net 90).
Most affiliate programs will offer some or all of the following payment options:
- Wire transfer
- Bank transfer
Do any affiliate programs pay in crypto?
This is one of those “..it depends” answers. Yes, some affiliate programs do pay out in cryptos, typically Bitcoin.
No, it’s not only crypto exchanges that pay in cryptocurrencies.
But the overarching problem here is that the vast, vast majority of affiliate programs do not offer crypto as a payment option.
Well, because as unpredictable as FIAT (paper) currency markets are, crypto is even more volatile.
Is affiliate marketing part of digital marketing?
Yes, affiliate marketing is a facet of digital marketing, and should be part of a holistic approach to a any company’s digital growth and organic reach.
The problem is that most people misunderstand what affiliate marketing is about, or get it confused with those scammy Internet marketing offers you see in every other YouTube or social media ad.
Digital marketing tends to be the discipline that people learn when they’re in college – it’s a mixture of SEO, PPC and social advertising with graduates kind left to figure out which to specialize in.
Affiliate marketing is rarely, if ever, taught as part of any college courses I’m aware of. Instead, people wind up learning on it their own through YouTube videos, blogs, or maybe one of the better courses that exist.
Ethical digital marketing is what the original concept of Internet marketing evolved into. Although there are still lots and lots “Internet marketing” gurus out there who’ll teach you how to get rich.
All you have to do is sign for their new course at just $4,997. Or just six easy payments of $897 per month.
Affiliate marketing and digital marketing are as far removed from Internet marketing scams as a politician is from the truth.
Does affiliate marketing pay well?
Yes, affiliate marketing pays well, so long as you choose the right affiliate programs to promote and in a profitable niche. There are no income guarantees with affiliate marketing because there are simply too many variables involved.
Now, that we’ve gotten the obvious stuff out of the way you might be wondering exactly how much you can make from affiliate marketing.
To be honest, the sky is pretty much the limit in terms of income potential.
Based on personal experience I know affiliates who earn anywhere from $1,000 to well over $100,000 per month.
But here’s the truth that you never, ever see in the sales pitch for any affiliate marketing course – 90% of affiliate marketers will never make any money from their efforts.
That’s not because affiliate marketing doesn’t work/is dead/is a scam, or whatever. It’s because they probably built a crappy site in a competitive niche and quit after 90 days to go chasing the next shiny object.
Of the remaining 10%, only around 5% of them will make maybe a few hundred bucks a year from their affiliate sites.
The final 5% are the guys and gals who earn either hundreds of thousands per year, or per month.
Basically, if it was easy to make millions with affiliate marketing then everyone would be doing it.
But it isn’t, so they’re not.
With that said, the income potential from affiliate sites is crazy high with far better returns than pretty much any other type of investment you can think of.
Does affiliate marketing take a lot of time?
Building a profitable affiliate marketing business takes anywhere from 12 – 24 months to achieve. With that said, some people achieve a lot of success in a shorter time frame.
Time is a constant.
But it’s also relative.
Which is annoying because although there are only 24 hours in a given day, it’s what you do with those hours is what matters.
You will need to invest at least 12 months in building a profitable affiliate site, blog or social channel.
That’s what it takes for a beginner to see results with a brand new domain name and their affiliate marketing efforts. Although it can take up to 2 years for your site to reach its full potential in terms of visitors and income.
Is affiliate marketing difficult?
No, affiliate marketing is not difficult in that it does not require a specific level of education or a large amount of money to invest.
If anything affiliate is far easier to run than a regular business in a number of ways:
- Requires minimal investment
- Faster path to profitability
- Almost no overheads
- No stock or inventory
- No employees (unless you want them)
- No customer service headaches
- Can be located in any country you wish
- Can be sold for 30x – 40x monthly income
But what affiliate marketing does require is consistent effort in publishing new content, learning about SEO, and actively working to drive as much traffic as possible to the pages that contain your most profitable affiliate links.
So while affiliate marketing is not difficult, it also doesn’t work on autopilot- you have to put the hours in if you really want to see results.
Is affiliate marketing passive income?
No, affiliate marketing is not passive income. Affiliate websites require maintenance and updates, you need to publish fresh content on a regular basis and your competitors will constantly try to outrank you, especially if you publish in a competitive market.
And this is the biggest problem with affiliate marketing as I see it – it’s sold as being “100% passive income – make money while you sleep!”.
Now, the “make money while you sleep” part is true. It’s awesome to wake up, check your stats and find that you’ve earned a few hundred (or thousand dollars) overnight.
That will never stop being cool.
What’s completely untrue however is that running affiliate sites is passive income.
It absolutely is not.
There’s a lot of work involved, even in just keeping the content updated on one website. If you have say 3 – 5 affiliate websites then it’s at least the equivalent of having a full time job.
Let me put it this way, if you already have a full-time job then you’ll have to invest at least 1 hour every evening, 7-days per week, to get your affiliate business off the ground.
So unless you believe working an extra 28 – 32 hours per month is “passive income”, then don’t fall for the BS that making money with affiliate marketing is passive.
Pros of affiliate marketing
- Very low startup costs
- No formal qualifications or credentials required
- No office/business space required
- No employees
- No franchise or licensing fees
- Very high earning potential
- Can be run from anywhere in the world
- Very high return on investment
Cons of affiliate marketing
- You will need to invest time in running the site
- Steep learning curve
- You will need to invest money in building links to your site
- There’s no guarantee of success
- Google can ban your site and destroy your income
Wrapping things up
And that’s our take on what beginners need to know about affiliate marketing.
There’s a lot more to learn – this article is only to introduce you to the subject.
But the rest of the content we publish here will get into the subject in more detail.