What Is Affiliate Marketing?
You probably use websites that are monetized with affiliate marketing all of the time, often without realizing so, and there’s a reason why: it’s one of the most popular ways for bloggers and webmasters to earn an income from their digital assets. The industry is worth an estimated $12 billion right now and is set to grow by at least a further 10% over the next few years. It’s a great way to earn money online without needing to develop products of your own. It comes as no surprise then that many SEOs are known to operate affiliate websites as a side-hustle, using their skills to drive traffic that they can earn a commission from.
But to be successful with affiliate marketing, you need to understand what it is, how to get started, and how to earn money from the channel. The good news is that anyone who has an online presence and ability to drive traffic can earn with affiliate marketing by promoting other people’s products.
This guide will introduce you to affiliate marketing, specifically looking at:
- What Is Affiliate Marketing?
- Why Is Affiliate Marketing So Popular?
- How Does Affiliate Marketing Work?
- How Are Affiliates Paid?
- Popular Affiliate Websites You’re Probably Already Using
- How to Get Started with Affiliate Marketing
What Is Affiliate Marketing?
What do we mean by ‘affiliate marketing’?
Affiliate marketing is a performance-based advertising method where businesses pay a commission on conversions to an affiliate. Essentially, an affiliate earns money by promoting and selling other people’s products, just without holding any stock, having to fulfill orders, or deal with customer services. Sales are tracked via affiliate links to enable commissions to be calculated.
Why Is Affiliate Marketing So Popular?
Deciding whether affiliate marketing is the right monetization channel for you should be a straightforward decision.
Are you a business-savvy entrepreneur looking for another source of income? Perhaps you’re a freelancer looking to up your game and start earning more? Maybe you’ve got one or more websites that are receiving significant volumes of traffic and you’re looking for a way to monetize it? Affiliate marketing is a popular option for many marketers, and it’s clear to see why:
- You can earn money with affiliate marketing from anywhere. You could be traveling and working on a beach or even at home in your bedroom. As long as you have an internet connection and computer, you’ll be able to run an affiliate business from anywhere. You can also work your own hours if you manage to make affiliate marketing deliver a full-time income.
- It’s a great way to earn a passive income. There are real opportunities to drive sales and earn commission payments even when you aren’t working.
- There’s big money to be made with affiliate marketing if you’ve got access to a consistent stream of potential customers or are ready to build a successful marketing strategy.
- Because you’re only acting as a referrer to other businesses, introducing your audience and encouraging a sale, you won’t have to handle customer service.
- There are very few barriers to entry and getting started. Plus, the startup costs for an affiliate business are low. In fact, the investment needed is much more weighted towards time than money.
- If you’re a skilled SEO and are able to rank a website for competitive terms, the returns from affiliate marketing could either supplement or completely outweigh, in some instances, client work.
How Does Affiliate Marketing Work?
Affiliate marketing works as a collaboration between a merchant and its affiliates.
But to clear up any confusion in this context:
Merchant = the business that is selling the product or service and who the customer hands the money to
Affiliate = the affiliate promotes the business’s content to their audience to drive customers and is paid a commission upon a successful sale (or sometimes for a lead)
How Businesses Use Affiliate Marketing
Businesses use affiliate marketing as one channel of their marketing mix. It allows them to benefit (in terms of sales and leads) from someone else’s (the affiliate’s) marketing strategy and audience.
Businesses who take advantage of this channel vary from those selling physical products via an eCommerce store to financial services (insurance, credit cards, etc.) and SaaS software tools through to virtual products (think eBooks and virtual training courses). There are very few businesses that couldn’t drive sales through affiliate marketing. As long as the right affiliates are out there to promote the products and services.
When a merchant collaborates with an affiliate, they’ll supply tracking links (to allow for the commission to be calculated) and often promotional assets, as well as sometimes unique offers (to hook an audience in) such as discount codes.
In many instances, merchants will work with an affiliate network to manage their affiliate scheme on their behalf to remove a lot of the associated admin. However, larger brands sometimes manage this internally. We’ll look at this in more detail below, but for any merchants considering using this channel for the first time, it’s important to know that much of the process can usually be handled by a specialist who will set things up and manage the program on your behalf, including onboarding affiliates and paying out the commission owed.
In most cases, merchants pay affiliates on a commission basis on a pre-arranged percentage of each sale. In some instances and sectors, this may also (or instead of) be offered on a per-lead basis, where a payment is made every time a lead is generated, regardless of whether it converts. This model is riskier to the merchant, so the payout will likely be lower.
If you’re a merchant looking to set up an affiliate scheme, check out this guide on how to find affiliates with SEMrush.
How Affiliates Promote Products and Services
In many cases, it’s up to an affiliate to leverage their own network to promote products and services in a way that works for them.
After all, the more sales an affiliate makes, the more money for both parties.
Many marketers and entrepreneurs will scope out a niche and develop a full marketing strategy to earn traffic to promote a certain sector, and in this case, it’s like starting a business from scratch, albeit being done based upon high earning potentials. On the other hand, bloggers and influencers can use affiliate marketing as a way to monetize a channel or audience that they’ve already built up.
The process in both of these remains pretty similar.
Once signed up to an affiliate scheme (or, ideally, a number of these), affiliates can use a number of different marketing tactics to drive traffic to an affiliate (either directly or via their own site or platform) and, hopefully, drive a sale or inquiry.
Popular marketing channels with affiliates include:
- PPC (But be careful to read the terms of affiliate agreements to see whether bidding on a merchant’s ‘brand’ terms is allowed)
- Social Media (especially popular with influencers)
- Content Marketing
But in reality, if an affiliate has a source of quality traffic, the earnings potential remains the same.
Smart affiliates will layer multiple channels together to increase their success and earnings.
How Are Affiliates Paid?
As already alluded to above, there are a number of different ways that affiliates are paid. This often depends upon the product or service being sold and the value of these.
Common payment structures for affiliates include:
Pay Per Sale (Fixed Fee): This is where a fixed fee commission is paid to the affiliate every time a sale is made, regardless of the order value.
Pay Per Sale (Percentage): The commission value that is paid is a percentage of the sale price or order value.
Pay Per Lead or Enquiry: A fixed fee is paid out every time a qualified lead or inquiry is made.
Pay Per Click: A (small) fixed fee is paid out every time a click is sent to the merchant’s site by the affiliate.
Which payment structure is used very much depends on individual merchants and the niche that they operate in. In some cases, affiliates will be given a choice of different payment structures to choose from and be incentivized accordingly.
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