How Does Affiliate Marketing Work?
Affiliate marketing is an Internet-based system where you (as an affiliate) get paid for referring sales or customers to another business. In this lesson we give an overview of How Affiliate Marketing Works.
There are many different ways you can earn money from being an affiliate marketer, including commission-based affiliate programs and AdSense. Here are some fictional examples of these:
Commission Based Affiliate Programs
Geoff has a website full of dog-training advice; on the side of his pages he has placed an ad for a dog-training eBook. If any of his visitors click on his ad and buy the eBook from the merchant's website, Geoff receives 75% of the price of the book as commission for sending the visitor to the merchant.
Marnie runs a very popular newsletter for people who want to learn yoga. She regularly sends out lessons and tips to her list members, and occasionally she promotes products that offer affiliate commissions. Whenever somebody from her newsletter list clicks on a link in her emails and buys one of the various products she's promoted she earns a percentage of the product price.
Tara has a health supplements website containing lots of useful information about various health supplements. By pasting a small segment of code into her website she gets ads relevant to her content automatically showing up on her page. She earns money every time a visitor to her site clicks on one of these ads, even if they don't end up buying from the merchant.
For a more detailed look at affiliate marketing in action check out our Affiliate Marketing Examples lesson.
Affiliate marketing can be a very lucrative business. There are a huge number of affiliates earning full-time incomes from affiliate marketing, and a lot of affiliates doing considerably more than that! Take a look at these figures...
This is real money, and real people just like you are earning it. So let's take a look at what affiliate marketing is...
Affiliate Marketing Is....
…Pay-for-performance. You only earn money as an affiliate if you're producing results for the merchant of a product or network such as Google, whether it's from sales, clicks or registrations.
…Big business! Affiliates worldwide collectively earn billions of dollars each year. One report estimated that affiliates in the UK alone earned over 2 billion dollars in 2006. Of course within that there are affiliates turning over millions of dollars a year, affiliates who scrape by earning $20/week and everything in between.
…A long established business model. Affiliate marketing has been around since people realized the Internet could be used for commerce. One of the earliest big affiliate programs was started by Amazon.com in 1996 (although, just quietly, their commissions aren't anything to write home about!)
…Internet-based. You can promote yourself or your website using offline methods, but when it comes to earning commissions, all the tracking and processing is done through the Internet. There's no door-to-door selling here!
…Open to anyone. You don't need any special credentials to be an affiliate. Since affiliate marketing is pay-for-performance, most affiliate programs are open to anyone, regardless of whether you're experienced or a complete novice. You also don't need to be a computer genius to be a successful affiliate - everyone goes through the same learning process.; it really only comes down to whether you can fight your way through to the other side!
Now that we've seen what affiliate marketing IS, here's what affiliate marketing is NOT:
Affiliate Marketing is Not...
…Creating and selling your own product. Creating your own product is a different business that requires a lot more risk than affiliate marketing. When you create a product you invest money in creating the product, marketing the product, handling payments and delivery, providing customer support and ongoing development. An affiliate is simply responsible for sending prospects to a merchant - a much less daunting task!
That said, product owners can learn a lot by being affiliates first, and a lot of affiliates go on to build their own products later in their careers.
...Earning $14,000 overnight just by uploading this one website and script (which you can buy here for $49.95 $29.95 for the next ten minutes only!) There are a lot of websites out there that will tell you that THEY have the secret formula.,THEY can tell you secrets that the experts don't want you to know, THEY can give you all the information you need to start your lifestyle of cars, boats, houses and giant wads of cash stacked on the table and THEY can back it up with screens and screens of testimonials from very satisfied and very rich customers. THEY will deliver you the world, at an absolute bargain price.
Here's the real scoop, the information that the "experts" REALLY don't want you to know, and I'll give it to you for free: there are no magic overnight success formulas. Certainly, there are people doing very well out of affiliate marketing: they've been working hard for a long time, they've made some good decisions and they deserve every success. Sure, there are campaigns that might turn over huge amounts of money in one day: they will have been planned for months in advance by very clever people with a lot of experience in making a lot of money.
The reality of affiliate marketing is that you need to spend time learning the ropes and, after that, spend time implementing what you've learned. You need to make a lot of mistakes and spend a lot of time anguishing over why you're making no sales. Then you WILL start making a few sales, and it will grow from there.
There are people and websites who can help you along the way (you're currently reading one of them), but no one has the ultimate, definitive solution.
There are occasionally good pieces of software developed that can also speed things up, but there's nothing that will automate everything for you. You'll still need to know what you're doing, and you'll still need to work; The gold-rush days where you could just rock into affiliate-town one day and strike it rich the next are steadily diminishing, if not gone altogether. Anyone who tells you different is (obviously!) selling something.
10 Excellent Reasons to Become an Affiliate
- You get to be your own boss.
You create your own opportunities. You choose how much you wish to earn and work accordingly. You choose to do things that interest you. You choose to take holidays when you need them. You choose to spend more time with your family. Regardless of where you are now, you can go as far as you like with affiliate marketing if you're willing to work. With this freedom comes responsibility, but for most affiliates the benefits far outweigh the negatives.
- No risk: It costs very little to get started as an affiliate.
In all seriousness you can become an affiliate and start earning commissions, without spending a dime. Most affiliates, however, will make an initial investment for some web hosting and a domain name for their first website. Hosting will set you back between $3 and $10 per month, and a domain name costs about $10 per year. Joining affiliate programs is free. There are lots of free ways to promote your website - for example being listed in the natural search listings of the search engines.
Generally you will end up spending money when you want to save time; you'll keep your spending to a minimum if you're the patient type and you're happy to do the tedious tasks yourself (this can even be a good thing to do with your first website, so that you learn how it works!).
- Anyone can become an affiliate.
Affiliate marketing is extremely democratic. You will find affiliates of all ages, from all different countries, with all sorts of backgrounds. All you need to get started affiliate marketing is Internet access, and you can operate from any country. (although some countries are restricted from certain networks and payment providers, but there are usually ways around this). You don't need to be an expert web designer, writer or marketing guru: these things will give you a slight head start, but for the most part affiliates all start at the same level and just learn by doing.
- You have a lot of choice
There are many different affiliate programs you can promote, hundreds of different markets you can promote to and lots of different methods for promoting products. In fact one of the biggest problems striking new affiliates istoo much choice
- You don't need to invest in building your own product.
This falls under the "no risk" category as well. Someone creating a product needs to be very thorough with their market research beforehand to be sure that they're creating something that actually sells. If they get it wrong it can mean tens of thousands of dollars in product development wasted! Affiliates don't have as much risk since they are only promoting products, and they can change products at any time.
- You don't need to focus solely on one topic.
In fact affiliates who are earning large amounts typically have a number of separate websites promoting different products across a variety of markets at any given time; they don't have all their eggs in one basket.
- You're not tied to any particular product
If a product isn't performing, or if you see a different product you'd like to promote, it's can be as easy as changing the links on your site. You can try lots of different products and see which ones work for you.
- You don't need to be concerned with delivery or payments.
That's all dealt with by the merchant or the merchant's payment processor.
- There's a lot of money to be made.
As mentioned earlier, affiliate marketing is a huge business and it doesn't look like it'll be going away anytime soon.
- Affiliate marketing can be a relatively passive income, freeing you to spend more time doing
the things you like.
Yes it takes time to get started, but once you're earning enough you'll be able to do what any decent business manager does: delegate. There is a huge wealth of freelance talent on the Internet these days, and you can easily outsource all but the most vital tasks.
In this lesson you’ve learned:
- Affiliate marketing is a web-based system where you get paid for referring sales or customers to another business.
- There are lots of different ways of being an affiliate (you'll see more of these in later lessons!).
- Affiliate marketing has been around for many years and is a legitimate business. Many large companies promote their products through affiliate programs, and affiliates earn billions and billions of dollars in commissions each year.
- Affiliate marketing is low risk: it costs very little to get started as an affiliate, and you're not burdened with the risks and responsibilities associated with building your own product.
- There are huge opportunities in affiliate marketing: there are thousands of markets and products you can promote, and lots of different methods you can try to promote them.
- Succeeding as an affiliate takes time and effort - there is a learning curve. Most successful affiliates have a number of embarrassing failures under their belts before they start doing well, but the rewards are worth it