Affiliate marketing is a growing trend that has benefits for merchants and marketers alike. If you are unfamiliar with the term affiliate marketing, you likely are familiar with the concept. Affiliate marketing is extremely widespread, with roughly 16% of all ecommerce sales worldwide being generated from affiliate marketing. Companies of all types are participating in affiliate marketing programs. Some of the biggest names in ecommerce, including Amazon and Instagram, have joined in by creating their own affiliate marketing programs. The rise of affiliate marketing has changed the way many companies think about branding online.
With so much buzz around affiliate marketing, it is a concept that every ecommerce entrepreneur should be familiar with. Affiliate marketing benefits businesses as well as individuals looking to capitalize on their online platforms. It’s a great opportunity for anyone to get involved and earn extra cash. So what is affiliate marketing and how does it work? Continue reading to learn how affiliate marketing works, and how to make money with affiliate marketing.
What is Affiliate Marketing?
Affiliate marketing is a marketing process in which an online publisher agrees to promote a product or service to their audience in exchange for a commission. Affiliate marketing is commonly associated with podcasts, blogs, social media pages, or other creator websites. For instance, a podcast sharing a promotional link for a product or service to their listeners is a form of affiliate marketing.
In affiliate marketing programs, the website or content creator (affiliate) receives a commission based on any sales generated from their promotional link. Programs have several ways to keep track of traffic and pay their affiliates, which we will discuss later. However, one constant in affiliate marketing is that affiliates receive pay based on commission for how much of a product or service they sell.
Brief History of Affiliate Marketing
Online affiliate marketing has taken off in recent years, and this is what most people think of when they hear the term affiliate marketing. But affiliate marketing has existed in other forms for decades, and even
For example, a small business offering referral discounts to customers is a form of affiliate marketing. Another common form of affiliate marketing we all encounter offline is insurance sales. An insurance agent gets paid a commission by the insurance company to sell an insurance plan. But insurance agents are rarely employed by the company directly.
Online affiliate marketing as we know it began in the late 90s with companies like Rakuten and CJ Affiliate (formerly Commission Junction). In the early days of the internet, the first affiliate marketing programs were established to let small companies reach a wider market. Over the next two decades, people began to spend more time and money online. As ecommerce boomed, affiliate marketing grew along with it. In recent years, the rise of content marketing and online influencers have further incentivized the use of affiliate marketing programs. The version of affiliate marketing we know today quickly became a mainstream form of marketing because it offers high visibility in a crowded, but lucrative, marketplace.
Businesses usually have to pay for marketing in some form. The best marketing is free or
Affiliate Marketing for Beginners: Who’s Involved?
To get a deeper understanding of how affiliate marketing works, it can be broken down into a few individual components. There are three main parties involved in any affiliate marketing program: the company or advertiser, the affiliate, and the consumer. Here’s a quick breakdown of the role each plays, and how affiliate marketing benefits each of them.
Companies
At the top of the affiliate marketing chain are the businesses. These businesses are the product manufacturers or service providers who are being promoted. Without them, there would be no products for affiliates to sell or consumers to purchase. Companies benefit from affiliate marketing because it is a low cost, low risk marketing plan with great ROI.
Companies need to pay a small fee to use affiliate marketing software. But beyond that, the only costs they pay are commission fees to the affiliates. The cost of an affiliate marketing program is largely dependent on the revenue generated for the company. When done right, affiliate marketing is a highly visible marketing platform requiring no labor and minimal financial investment.
There are a couple of minor risks involved in affiliate marketing programs for companies. First, because affiliates are not directly employed by the company, it is possible that their content might not always align with the company’s brand image. However, most companies mitigate this risk by providing content guidelines for affiliates who market their products.
Second, there is some risk of fraudulent activity on affiliate links to generate a higher commission for some affiliates. However, most affiliate marketing software has security measures in place to prevent this from happening.
Affiliates
It’s probably redundant to say that you can’t have affiliate marketing without the affiliates. Needless to say, affiliates play a very important role here. Affiliates are responsible for sharing links and promoting a company’s products or services.
Anyone can become an affiliate. But the most successful affiliate marketers are individuals with a prominent online following. This is why bloggers, podcasts, influencers, and content creators often use affiliate marketing as a way to make money. These individuals can leverage their existing audiences to generate traffic to their affiliate links. For many of them, the products and services they advertise are tied to their niche. This means that the affiliate’s audience is likely to have interest in the product, and thus is more likely to make a purchase.
Affiliates benefit from affiliate marketing by getting paid a commission. Commissions are typically tracked by assigning unique affiliate links to affiliates. The more traffic generated by an affiliate’s link, the more they can get paid. Commissions might be based on sales, views, subscriptions, or other metrics depending on the specific product or service.
For affiliates, there are some small risks as well. First, affiliate marketing is not always successful and can take some time. Income from affiliate marketing varies, with most affiliates making less than $20,000 annually, while top earners make six figures.
There is also a risk of losing the trust or attention of your audience if you share too much affiliate marketing content. Affiliate marketing is only valuable if people are interested in what is being sold. People do not like being sold to all the time. As such, most individuals will be more receptive to occasional marketing content rather than constant marketing. Affiliate marketers need to strike a balance between organic and marketing content, while also picking the right items to promote.
Consumers
The last party involved in affiliate marketing is the consumers. Without consumers, there is nobody to buy products or subscribe to services. Consumers can benefit in a number of ways from affiliate marketing. First and foremost, they can discover new products or services which they love. In addition, some affiliate marketing programs also offer discounts for products and services. This could be done at the discretion of the company or the affiliate. For instance, an affiliate might offer their own incentives to followers who click on an affiliate link. Or, the company might offer a discount on purchases made through a participating affiliate link.
Consumers complete the cycle of affiliate marketing, and for them there is little to no risk involved. Nobody is required to make any purchases or spend any money. The worst that can happen is that a consumer spends money on something they are not satisfied with. But, in most cases, they either pay for something they enjoy, or do not spend any money at all.
Types of Affiliate Marketing
Affiliate marketing is usually broken up into three main categories for affiliate marketers. Those categories are: unattached, related, and involved affiliate marketing.
Unattached Affiliate Marketing
Unattached affiliate marketing is when the affiliate has no direct involvement or authority with the product being marketed. In other words, there is no discernible link between the affiliate’s niche and the product being marketed.
This model of affiliate marketing comes with some obvious downsides. There is less assurance that the affiliate’s audience will have interest in the product they are marketing. If the audience is not predisposed to liking the product, there is a lower chance of them interacting with affiliate links.
Additionally, the affiliate’s promotion of the product will likely seem less genuine or authentic. This can cause people to lose interest in the content or ignore the marketing altogether. This is not only bad for immediate success, but can hurt in the
However, some people still prefer this method because it requires minimal effort. While the payouts are typically smaller, it can still earn a small amount of money for very little work.
Related Affiliate Marketing
Related affiliate marketing is when an affiliate promotes a product which is relevant to their niche, but that they may not have direct experience with. This is preferable to unattached marketing because the affiliate’s audience is expected to have interest in the product. And because it is a relevant product, the affiliate may be seen as a credible source and advocate for it.
Related affiliate marketing is very common because it is typically more successful than unattached, while requiring a similar amount of work. In many cases, related affiliate marketing can turn into related affiliate marketing over time as well.
Involved Affiliate Marketing
Involved affiliate marketing represents the strongest attachment between the affiliate and product. In this model, the affiliate promotes an item which they are both familiar with and confident about. Often, the product will be directly relevant to the affiliate’s niche. Involved affiliate marketing is ideal for affiliates because it lets them speak honestly and passionately about a product they use. This helps to keep their content fresh and lessens the risk of losing the audience’s attention.
Involved affiliate marketing is also the most likely model to be relevant to the consumers. If the affiliate uses the product or service, it is likely relevant to their niche, which is also of interest to their audience. As a result, the affiliate’s followers are more predisposed to purchase the product. When combined with a more compelling sales pitch, this can is often the most successful form of affiliate marketing.
Related affiliate marketing can also turn into involved affiliate marketing if an affiliate tests out the products themselves. This can also be ideal because the audience can see the affiliate’s familiarity with the product grow over time.
Involved affiliate marketing is ideal for everyone involved. While it can be difficult to find products that an affiliate is passionate about, the payoff is often great.
Affiliate Marketing Basics for Brands: How to Track Sales
Affiliates make money based on the level of engagement with their promotional content. But that does not explain exactly how companies keep track of affiliate sales. This may seem like the most confusing part of affiliate marketing from the outside. But it’s actually relatively simple. An affiliate’s commissions are tracked through the use of affiliate links.
What Are Affiliate Links?
When an affiliate signs up for an affiliate program, they are assigned a unique affiliate link on the company’s website. This link is a specific URL designated to the affiliate, often containing their username or another identifying tag.
Companies are able to use cookies to measure traffic on these URLs. So any time a customer clicks on an affiliate link, there is a chance for the affiliate to earn a commission. Some programs do pay affiliates simply based on page views. However, it is more common for commissions to be tied to sales (for products) or subscriptions (for services).
Affiliate links serve a couple of key purposes.
First and foremost, they make it possible for affiliates to receive payments for their work. Without affiliate links, it would be incredibly difficult for companies to know how much they owe affiliates. This brings us to another key function of affiliate links.
They also enable companies to measure the success of their affiliate marketing programs. Companies need to be able to quantify the value of any marketing strategy to know whether or not it’s successful. Without affiliate links, companies would have to rely on blind estimates. But affiliate links provide a direct and object measurement of the success of an affiliate marketing program.
Furthermore, they allow companies to see which affiliates are the most successful. This can open up new marketing opportunities or provide greater insights into a product’s market.
There is some slight risk involved with affiliate links, as mentioned previously. It is possible in some cases for individuals to artificially inflate traffic for affiliate links, leading to a higher commission. But this is rare, and many leading software programs have security measures in place to prevent it.
Pros and Cons of Affiliate Marketing Programs
Effective marketing always has benefits for the companies involved. However, most marketing strategies also come with some risk. Affiliate marketing is no exception to this principle. Here are some of the pros and cons of affiliate marketing for both the company and the affiliate involved.
Pro — Minimal involvement
For both parties, affiliate marketing is relatively low stakes when it comes to time and energy investment. For the company, there is almost no work at all. They simply participate in an affiliate program, provide affiliate links, and wait for shoppers to roll in. For affiliates, the work is also fairly light. They don’t need to worry about products, order fulfillment, or anything on the back end. They simply promote the item and share their affiliate link. When done right, affiliate marketing can be one of the best ways to earn passive income online.
Pro — Wide audience
This one is specific to the companies that use affiliate marketing. When companies use affiliate marketing programs, they have an opportunity to reach an extremely wide audience. This becomes more applicable as more and more affiliate marketers promote their products. Affiliate marketing can be a tremendous way for companies to reach an extremely wide range of demographics with relatively little investment.
Pro — Highly scalable
Affiliates usually earn a commission based on the number of sales generated through their affiliate links. This means their revenue has the chance to increase with every marketing opportunity. Affiliate marketing revenue also grows along with the affiliate’s own audience. The same scalability applies for companies participating in affiliate marketing programs. As their products reach a wider audience, they have more opportunities to sell their products.
Pro — Discover new products or services
Sometimes, even affiliates themselves can discover and fall in love with the products they sell. This is the best of both worlds for an affiliate. On the one hand, they get to enjoy and make use of a new product or service. On the other, they then have a great marketing opportunity to promote a product which they are passionate about.
Con — Can take time
Affiliate marketing does not always pay off immediately, especially for affiliates. It may take time to build a wide enough audience to generate real revenue through affiliate marketing. It may also take time for affiliates to find products or companies whose services are most appealing to their audience.
Con — Limited options
Affiliates who sign up for an affiliate marketing program are limited to the products available through that program. This can present some challenges, as it may be difficult to match with companies that are relevant to the affiliate’s niche.
Con — Can come across as inauthentic
In the case of unattached affiliate marketing, some consumers can be dissuaded by marketing that does not seem genuine. If a product or service has no relevance to the person marketing it, modern consumers can quickly lose interest and tune out the advertisement. This can be damaging to the affiliate’s reputation while also contributing no sales for the marketed product.
How to Start Affiliate Marketing as an Affiliate
Before starting with affiliate marketing, affiliates and companies should conduct some research and devise a plan. Like all types of marketing, the success of an affiliate marketing program will depend largely on having a marketing plan. Both parties should identify niches and products that go well together. For affiliates, choosing products that will appeal to their audience will generate the most revenue. Likewise, companies will generate more sales if their affiliates audiences are interested in their products.
As for how to become an affiliate marketer, affiliates must sign up for an affiliate marketing program. There are a ton of affiliate marketing programs online that affiliates can join. Some of the best affiliate marketing programs are hosted by familiar,
This is not the only affiliate marketing program available to an affiliate marketer, of course. A few other examples include ShareASale, Impact, and Commission Junction.
Make Money Through Affiliate Marketing and More
Becoming an affiliate marketer is a great way to add a revenue stream to your website. But there are plenty of other ways to make money online by starting your own ecommerce website. To learn more, read about the benefits of working with Ecwid’s ecommerce platform.
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