Affiliate marketing is a very popular, and potentially lucrative way to earn money online. So, how does affiliate marketing work? In this article we’ll cover what it is, and how you can start your own affiliate marketing business.
“Affiliate marketing is a type of performance-based marketing in which a business rewards one or more affiliates for each visitor or customer brought by the affiliate’s own marketing efforts.”
It’s a win-win situation for both the merchant / business and the affiliate marketer.
Note: Many affiliate networks don’t use the term merchant. They use “advertiser” or “vendor” instead. It’s the same thing. Some affiliate networks also don’t use the term affiliate. They use “publisher” instead. Once again, it’s the same thing.
Merchant = Advertiser or Vendor
Affiliate = Publisher
The main reasons why merchants love affiliates, include:
Note: Some merchants also pay for leads. However, most affiliate programs only pay their affiliates a commission based on sales.
The main reasons for becoming an affiliate marketer, include:
Based on the above benefits, you can see why affiliate marketing is so popular. Many digital products pay more than 50% commission. There are also many merchants that’ll pay you a recurring monthly commission. You can build up a great passive income this way.
The best way to explain how affiliate marketing works is to break it down into easy to follow steps.
Finding the right product(s) to promote may seem like looking for a needle in a haystack. According to ScrapeHero, Amazon.com alone had a total of 119,928,851 products in April 2019.
Here are some tips to help you narrow down your search:
Many merchants don’t have their own in-house affiliate program. They use large affiliate networks to host their affiliate program instead. These include:
The above affiliate networks have thousands of merchants on them. Unfortunately you won’t be able to view their details until you sign up as an affiliate. More about that later.
Once you’ve identified to suitable affiliate programs it’s time to apply. With some affiliate programs approval is instant. With others you have to wait for them to approve your account while they evaluate your application.
Many merchants are cautious about allowing just anyone to join their affiliate program. It’s normal for them to enquire about how you’re planning on promoting them. They want to avoid affiliates that may make them look spammy, and damage their credibility.
Always make sure you read the terms and conditions of any affiliate program you’d like to join. And, abide by the rules. If you’re not sure about anything, rather contact their support desk than make assumptions.
Note that some affiliate networks also require that you must have an active website. And, some also you require you to not only apply with them but also with individual merchants.
CJ Affiliate (previously Commission Junction) – Requires you to have an active website.
ShareASale – Requires you to have an active website. They normally also require an email address that’s linked to your domain name. For example, if your domain is abc.com then your email should be name[at]abc.com.
FlexOffers – Requires you to have an active and verified website.
ClickBank – A great affiliate network for digital products. They don’t require affiliates to have a website but they highly recommend it.
Amazon – Does not require affiliates to have a website. If you have good original content and at least 500 followers on Facebook, Instagram, Twitter, YouTube or Twitch.tv you should get approved.
Note: At Brand Builders we specialize in building high quality Amazon affiliate websites with a 96% success rate. Have a look to find out how we can help you.
Once you’ve been accepted to an affiliate program, you’ll be given an unique affiliate link and marketing tools. You’ll also be able to check statistics on how well you’re doing in your affiliate dashboard. Let’s break it down.
Every affiliate has an unique affiliate link. This is how the merchant can link sales or leads to you and compensate you accordingly.
A typical affiliate link may look something like this:
merchant.com/?aff=name (many affiliate links are a lot longer and uglier)
Try to shorten or cloak your affiliate link, for the following reasons:
Customers don’t pay more for a product if they find the merchant via an affiliate link. However, for one or other reason, some people just don’t like clicking on affiliate links.
By cloaking your affiliate link, users may see it’s an affiliate link after they’ve clicked on it. However, it would have triggered a “cookie” on the merchant’s site. This means that even if they don’t buy something straight away you’ll still get credit for the sale.
Different merchants have different cookie lengths. Normally a cookie will last for at least 30 days. So, even if a customer only makes a purchase 30 days later you’ll normally still earn a commission.
Note there are exceptions to the above explanation about cookies.
If a user clears all cookies on their computer the merchant may not be able to link the sale to you. If a user clicks on someone else’s affiliate link after they’ve clicked on yours, the last cookie may override yours.
Note: Amazon does not allow their associates / affiliates to shorten or cloak their affiliate links. In addition, with Amazon you need to clearly identify yourself as an Amazon affiliate:
“As an Amazon Associate I earn from qualifying purchases.”
Good url shortening or cloaking service providers all show the number of times your affiliate link has been clicked on. You’ll be able to match it to the number of clicks reported by the merchant in your affiliate dashboard.
If there’s a huge discrepancy you’ll know something is wrong. Just remember that bots and your own clicks may skew the results.
Google expects affiliate links to have the rel=”sponsored” or rel=”nofollow” attribute. This applies to all outbound links that Google considers as advertisements or paid links.
Any good merchant will provide you with marketing tools to help you promote them. At the very least, these tools will include banners in various sizes you can add to your site.
Be cautious when using banners. They often look spammy and don’t really add value or contribute to a good user experience. Many people have become blind to banner ads.
According to WordStream, the average click-through rate (CTR) for banner ads is only 0.25%. That means, on average, only one out of every 400 visitors to your site will click on a banner ad.
If you’re promoting affiliate offers on your blog, rather use anchor text to link to the merchants you’re promoting.
It’s standard practice for merchants to provide their affiliates with an affiliate dashboard. Here you can view the number of people you’ve sent to the merchant. Your affiliate dashboard is also where you can see the number of sales you’ve generated for the merchant.
Merchant Conversion Rate
It’s very difficult to determine what a good conversion rate is. That’s how many sales you can expect from every 100 visitors you send to the merchant.
There are simply too many variables involved. Any number of factors can play a role, from the source of the traffic to how well the merchant’s page converts.
In general, 2% is a good conversion rate. This is not based on visitors to your website but visitors you’ve referred to the merchant. So, if you get two sales for every 100 visitors you send to the merchant you’re doing okay.
Note: According to MonitorBacklinks, the average affiliate conversion rate for a website is generally between 0.5% and 1%. This means if your website has 5,000 visitors per month you can expect between 25 and 50 affiliate sales per month.
First and foremost, as an affiliate marketer you need to understand the difference between your role and that of the merchant.
Your role is to promote a product, not to sell it. Leave the selling up to the merchant. What you need to do is to warm up the leads. This way, when they visit the merchant they are no longer cold traffic.
Mention the features of the product and how it can benefit them. Share any personal experience you have using the product. Give them helpful tips and advice that may not be mentioned on the merchant’s site.
Most affiliate marketers only use one of two ways to promote products as an affiliate, namely:
Very few affiliate marketers really use both paid advertising and free organic traffic.
Both options have advantages and disadvantages.
Advantages of Paid Advertising
Facebook is one of the favorite advertising channels for affiliate marketers.
It’s quick and easy so choose a marketing objective.
Facebook also allows you to target your ideal audience.
Facebook is not the only good paid advertising platform. It may be one of the largest platforms but there are many others, including:
Disadvantages of Paid Advertising
Advantages of Free Organic Traffic
Let’s take a moment to consider the value of free organic traffic from Google.
According to Ubersuggest a keyword such as “weight loss workout” has a monthly search volume of 22,200. It has a SEO Difficulty of only 29/100 so it’s relatively easy to rank for. A paid ad on Google for this keyword would cost you about $2.89 per click.
According to Backlinko the #1 organic result in Google gets about 31.7% of all clicks.
This means that if you rank #1 in Google for weight loss workout you should get about 7,037 visitors a month. (22,200 searches x 31.7% = 7,037 clicks in #1 position)
At a Cost Per Click (CPC) of $2.89 you’ll pay about $20,336.93 for 7,037 clicks. By ranking organically in #1 for that keyword you pay nothing. It’s a huge saving!
Disadvantages of Free Organic Traffic
Some people say free organic traffic vs paid advertising is all about time vs money.
A common suggestion is the following:
If you have a lot of time but not a lot of money, it’s a good idea to go after organic traffic.
If you don’t have a lot of time but have money, it’s a good idea to use paid advertising.
What they suggest is not necessarily the best way to build an affiliate business.
Even if you don’t have a lot of time but have money, paid advertising is only one option.
Another option is to rather spend money on content creation than paid ads. This way you can still reap the benefit of free organic traffic if you don’t have time to create the content yourself.
Some sites where you can outsource your content creation to freelancers, include:
Most successful affiliate marketers will tell you “the money is in the list.” Whether you use paid advertising or rely on free organic traffic, the sooner you start building your list the better.
You want to capture as many email addresses from your target audience as you can. Having a responsive email list that agreed to receive emails from you is a valuable asset.
On average 16.22% of your email list will open your email and 7.17% will click on links in your email. This is the industry average, according to Constant Contact.
If you have a huge, responsive following you can make a lot of money from your email list.
You don’t own the traffic you get from paid advertising or organic sources. They come and go, often never to be seen again. However, your email list is traffic you own.
You can reach out to people on your email list whenever you want to. And, if you’ve built up some credibility with your list, you’ll find they are a lot more responsive than cold traffic.
ActiveCampaign’s Lite plan starts at $15 per month for up to 500 contacts. ConvertKit offers a limited free plan for up to 500 subscribers.
Note: It’s against Amazon’s operating agreement for affiliates to include their affiliate link in email marketing campaigns. Whatever product you’re promoting as an affiliate, always make sure you make sure you comply with the affiliate program’s promotional requirements.
The Federal Trade Commission (FTC) is there to protect America’s consumers. This includes helping consumers to make informed decisions.
Suppose you’re interested in buying a new stove. You meet someone at a party that tells you about this fantastic new stove. Would that play a part in your decision making process? Your answer would more than likely be “yes.”
Now let’s assume that the person you met at the party works for the stove manufacturer. Would you like to be made aware of that? Of course you do. That’s what at the heart of the FTC’s endorsement guides.
The FTC expects you to disclose your relationship with the merchant you’re promoting. That way your site visitors can decide how much weight your endorsement carries.
According to the FTC, your disclosure can be something like:
“I get commissions for purchases made through links in this post”
Simply mentioning “affiliate link” isn’t good enough. Not everybody will understand it means you’ll be paid a commission if they click on your link and make a purchase.
The FTC also expects your disclosure to be clearly visible, preferably close to your recommendation. You shouldn’t expect visitors to have to scroll down to the bottom of your page to find it.
Here are some examples:
Making Sense of Cents places their affiliate disclosure directly underneath the main heading.
Ultimate IT Guys places their affiliate disclosure directly beneath their top navigation menu.
A Relaxed Gal places her affiliate disclosure in the body of her posts, close to the top.
Take note that an affiliate disclosure isn’t only necessary if you have a website. It’s also required for social media. Some social media platforms such as Twitter don’t allow you enough space to post a long disclaimer. However, using #ad should be sufficient.
Always try to add value when you promote a product. Don’t just mention it. If possible, promote products you understand, or better yet, have used yourself. Write about your personal experience.
Google has shared some good search engine optimization tips for affiliate programs.
They want to see websites with original content that adds value to users. Simply reposting information that can be found on the merchant’s site and many others, isn’t good enough.
According to Google: “Added value means additional meaningful content or features.”
“Thin” affiliate sites that don’t provide added value for users are unlikely to rank well.
“Good affiliates ads value, for example by offering original product reviews, ratings, navigation of products or categories, and product comparisons.”
Additional tips from Google include:
If you want to learn more about how to monetize a blog, we’ve written an article on how to make money blogging.
We’ve covered a lot of ground in this article.
We trust it has answered the question: How does affiliate marketing work?
We realize if you’re new to affiliate marketing you may have some additional questions. Book a coaching call with one of our experts now and let’s explore how we can help you succeed.