What is Affiliate Marketing and How does it work?

When building a website, becoming an affiliate marketer is one of the best ways to generate passive income. It is an effective marketing strategy used by many big companies like Amazon and eBay that helps the creator of the website to create extra revenue.

What is Affiliate Marketing?

Affiliate marketing is a marketing strategy in which an affiliate is added in between the producer and the consumer.  The main task of the affiliate is to generate interest in the product and lead as many customers as possible to interact with the product.  In this advertising model, companies outsource their marketing burden by incentivizing the affiliates (like individual website creators) to promote their product. As an example of a contemporary marketing strategy, affiliate marketing helps both the sellers and the affiliates by spreading the responsibilities of product marketing across different contributors.

Affiliate marketing is an effective method of generating revenue for website creators like you, as it can connect individual website creators to big companies looking to outsource a portion of their product marketing responsibilities. Many online advertisements you can see on blogs or small scale websites are examples of affiliate marketing and there is a reason why it is preferred by so many website creators. Affiliate marketing is a convenient, reliable and flexible option for creators looking for ways to monetize their websites and it is a market with a relatively low barrier of entry. Here’s a detailed review of how affiliate marketing works and how to use it effectively:

How Does Affiliate Marketing Work?

The affiliate marketing model is mainly comprised of three parties: the seller, the consumer and the affiliate.  The role of the seller and the consumer are straightforward as they are the essential actors of any business model, but the role of the affiliate is the most important one , as it is the role of the website creator in this model.

The main idea of affiliate marketing is to incentivize an affiliate to promote a certain product. This means that brands pay affiliates to promote their services and spark interest in their products in their respective channels of communication. For a website creator, the channel would be the website and to become an affiliate the creator would allow the brand to place advertisements on their website. When a buyer interacts with the advertisement on the website and ends up buying the product the affiliate receives a share of the revenue generated by their advertisement. Companies have different policies when it comes when and how much an affiliate gets paid, as some companies pay the affiliates per the traffic they generate through their advertisements while some require the buyer to buy the product in order to pay the affiliate. There are three different main methods of how affiliates get paid:

Pay Per Sale

This is a pretty straightforward method where the companies pay the affiliates a share of the revenue they make through the purchase made by a customer coming from the affiliate’s website. Naturally, if you are getting paid per sale, it is not enough to direct the customer to the company’s website, but you actually have to convince them to buy the product.

Pay Per Lead

Pay per lead is a relatively more flexible method of payment compared to pay per sale, since it doesn’t necessarily require the customer to buy the product, but to interact with the company’s website to some extent whether it’s subscribing to a newsletter or signing up for a trial product.

Pay Per Click

As the name suggests, pay per click is the most flexible method among the three. If you are getting paid per click, it is enough to simply redirect the customers from your website to the company’s website. Companies paying affiliates with this method are usually aiming to increase the traffic in their websites.

How to Become an Affiliate Marketer

            The data available on Statista.com reveals that affiliate marketing spend in the United States almost doubled between 2016 and 2023, with the current figure standing at 8.2 billion dollars per year. This shows that affiliate marketing is a fast growing business model and there is still plenty of room in the market for new affiliates who want a share of the pie.

The first step to become an affiliate marketer is to identify your niche and find a product that matches the niche your website is appealing to. Successful affiliate marketing strategies would keep their specific audience in mind when choosing a product to endorse. If the content of your website roughly matches to the product you are endorsing, your audience is more likely to interact with your advertisements which will result in a higher revenue generated by your advertisement.

Next important step is analyzing the market of your chosen product for factors like demand and competition within the market. After completing these steps and deciding on an optimal product that you are interested in, the next step is looking into affiliate programs. Affiliate programs help connecting potential affiliates to brands looking for affiliates. Since it can be really hard to find brands through personal connections, using an affiliate program at the cost of a commission will be a better idea.

Affiliate programs vary from low-paying, high-volume programs like Amazon’s, to high-paying, low-volume programs created by big companies that usually sell a product with a limited market demand. Choosing the right type of program for your website will be crucial for the success of your marketing model, as it will be a significant factor determining your revenue from being an affiliate. Once you sign up for a program, the next step is to coming up with ways to endorse the product which can vary from click-on advertisements to posts reviewing the product.  One important thing to note here is that you have to be transparent about receiving income from an endorsement per Federal Trade Commissions (FTC) regulations.

There is one last step in the process which is to decide your level of involvement with the product you are endorsing. There are three main levels of involvement:

Unattached

In this model you don’t have any relation to the product you are endorsing, you are just trying to redirect your website’s visitors to the companies’ websites and usually get paid per click. Of course, this is the level of involvement that requires the least commitment and it is preferred by many. However, this can easily backfire and damage your appeal to your audience as you don’t have direct control over the product you are endorsing and don’t always have a way to make sure the product is actually worth buying.

Involved

This is the model where you only endorse products that you personally use and genuinely believe are worth buying. This method narrows down your pool of potential products you can endorse, however it is much easier to form healthy relationships with companies that can lead to partnerships by using this method as you truly believe in their products.

Related

Being a related affiliate is the middle ground between involved and unattached affiliate marketing. When you choose a product to endorse considering your website’s audience, you are already on track to be a related affiliate. Related affiliates only endorse products within their field of interests, but these products are not necessarily the ones that they personally use. For example, the creator of a website on camping might endorse a camping tent that they don’t necessarily use. While there is still the risk of losing your audience’s trust in case you endorse a bad product, this is a good way to match your audience’s interest to products that you are endorsing without sacrificing too much from the pool of potential products you can endorse.

Advantages of Affiliate Marketing

Modern

A report published by Business Insider reveals that 15% of the revenue generated by digital media companies comes from affiliate marketing. There is no doubt affiliate marketing is a trending marketing strategy and entering the field early on will benefit individual website creators like you.

Low Commitment

Affiliate marketing is a useful strategy for websites because it generates income without the affiliate doing much work. Affiliates get paid when consumers interact with the advertisements hosted on their websites which means your website can generate extra revenue without any kind of commitment on your part.

Flexible and Convenient

As an affiliate marketer you get the chance to decide whether you want to commit full-time to affiliate marketing or doing it as a side hustle. It is also one of the best ways to make money while working from home. The highly flexible and convenient work model is the main reason why many content creators prefer affiliate marketing.

No Customer Relations

As the affiliate, your only job is to connect the consumers to the sellers and once you successfully do that your job is over. This means that you don’t have to deal with customer complaints or feedback and still get paid for your role in the transaction chain.

Disadvantages of Affiliate Marketing

Reputation Damage

If the product you are endorsing does not satisfy the consumers, your website’s reputation will inevitably be damaged. Although you can eliminate this problem to some extent by extensively researching a product before you decide to endorse it, your website will still not be immune as you have no actual control over the product’s quality.

Long-Term

Because affiliate marketing is a popular marketing method with a low barrier of entry for website creators, it is hard to generate substantial amounts of income in the short term. While building an affiliate profile for your website, patience is the key since the income levels will increase exponentially as you build your audience.

Uncertainty

Building on top of the previous point, there is no guaranteed success in affiliate marketing. While it is true affiliate marketing and affiliate marketing networks are a convenient, flexible and low-commitment method to generate income, there are simply too many affiliates in the market that it is impossible for everyone to succeed. The most successful affiliates will find a way to stand out from the rest of their competition.

Conclusion

Affiliate marketing is a highly preferable way for website creators to monetize their websites, as it is a very convenient way to generate passive income. While being an affiliate has its downsides, it is an effective side hustle that requires low commitment on the affiliate’s part. Overall, affiliate marketing is definitely a good tool that is worth considering while you are building your website.