Hey guys! Today let’s talk about one of the best ways to earn a passive income by exploring what Affiliate Marketing is about and how it works.
Affiliate marketing is 1 of 7 different types of online marketing and costs almost nothing to get started as an online business. It is the process of promoting another person’s product, service or website by referring visitors to them. If your visitor then goes on to visit the other website, and performs some form of action like sign-up, purchase or inquire, then the affiliate marketer may receive a small commission or other form of compensation for the referring the business (a cut of the profit from the sale).
Sounds awesome right! Just simply set up a website, refer business and get paid without even needing to be there!
Well Yes and No! Yes, because once you have set up the system, you are generating traffic to your website, and your referrals are sound and genuine, then it is a great income generating source.
No, because as with just about everything, it is not as easy as it sounds. There are skills you need to develop, work that needs to be done up front before the cash flow, and most importantly, it is about building that engagement with your target audience and having the traffic come to your website. Without traffic, nothing happens!
Right, let’s get into a little more detail about the system and how it works.
The Affiliate Marketing System
The system through which affiliate marketing works is quite straight forward.
- The Customer: The customer searches for something online… say a sit-stand desk. They don’t know much about this new type of table, other than the fact that people are raving about it and the health benefits for desk jobs.
- The Keyword: The customer then searches in Google (or another search engine) using keywords relating to “what is a sit-stand desk” and maybe “the best sit-stand desk” or even “sit-stand desk reviews”.
- The Affiliate Marketer’s/Publisher’s Website: The customer may then come across an article about one of these searches on our website. We go in good deal, with useful pictures, about what a sit-stand desk is and what to look for when buying one. Our article then suggests a certain table and we ask the visitor to check out our review on the table.
- The Affiliate Link: They click through to our review and after being convinced of the product, they click through the affiliate link to another website which is selling this desk.
- The Merchant’s Website: Arriving on the merchant’s website, the customer decides to place an order for the desk. The merchant then processes the order and ships out the item.
- The Commission: It was specified in the Affiliate Program’s Terms and Conditions between you (the Publisher) and them (the Merchant) that a 20% commission will be paid out on a successful referral. As a result of the $200 purchase you receive a $40 payout from the Publisher for your referral.
Customer ⇒ Keyword Search ⇒ Publisher Website ⇒ Affiliate Link ⇒ Merchant Website ⇒ Commission
Pretty straight forward right! But there are a couple of key points that must happen for the system to work.
The first is that the customer must be able to find your website somehow through they keyword search. This is where the different methods of online marketing come in to help.
The second is that the customer must click through the affiliate link you provide, otherwise there is no way for the merchant to know you referred the sale. Also note, that this costs the customer nothing to click through… it is almost like a normal hyperlink.
And third, the customer must typically buy within a specified period after the referral. I go into more details below, however most affiliate programs specify a cookie length period, say 30 days, for which the referral remains valid. This means the customer must buy within 30 days of clicking through your affiliate link for you to get credited the referral. This is typically beyond your control, other than the strength, authenticity and quality of your suggestion.
The art of marketing indeed!
Let’s get into a few definitions to help make things clear.
Is also known as the affiliate marketer who does the ‘marketing’ of the product, service or website. When creating an online affiliate business, most people are on this side of the fence, creating websites, blog and videos to promote products they believe in or use.
An easy way to remember is that the publisher ‘publishes’ marketing content (websites, videos, articles etc.) to promote the merchant’s products or services. They help extend the marketing reach of the business selling the product.
The merchant is the person or company who actually sells the product and is sometime known as the vendor, seller or retailer. They could be the manufacturer, but could also be a distributor like Amazon or Best Buy. They are the ones who sell the final product to the customer and for which part of their profit goes to you for the referral. You could also be the merchant if you are looking for people to help market your product to the world!
A quick side note: Amazon have one of the largest affiliate programs in the world called Amazon Associates.
This comes about, as some merchants choose to manage their affiliate program through a third party service called the Affiliate Network. An affiliate network consists of a network of publishers and merchants.
Publishers sign-up to the affiliate network, and then can apply for affiliate programs with any of the merchants within the network. If approved, the publisher can then start promoting that merchant’s products, and the payments and tracking are managed by the affiliate network.
Affiliate Program Terms and Conditions
The terms and conditions for the affiliate program forms the contract between the Merchant and the Publisher. It is extremely important that you read these terms and conditions in detail, unlike all the other ones we ignore and simply ‘accept’.
These are important, because it defines the rules on how you can promote and advertise products (some are very strict), and if you don’t follow them, you either don’t get paid or get banned. It also gives you useful details like how long the cookie duration is and the commission structure, so you understand how much you get paid for what type of referral.
What are Affiliate Links and How Do They Work
An affiliate link is firstly what directs the customer to the merchant’s website, so in simple terms it is the same as a normal hyperlink. However, most affiliate links contain some additional details that tells the merchant who the referral came from. It might come in a form similar to this:
You can see that at the end of the URL, there is an affiliate ID attached.
So the customer clicks through the link, at no additional cost to them (by they way), and they arrive at the merchants website. In the same process, the merchant’s website usually places a ‘cookie‘ on the person’s computer. Many websites do this, so it is a normal thing to occur.
This is where the cookie length comes in. Most affiliate programs specify a cookie duration for which the referral is valid. As a result, the cookie has some sort of time and date data to indicate when the referral was first made. If the customer then proceeds to purchase a product or service, the merchant looks for this cookie, checks the duration and of course completes the sale as per normal.
Following this, the referral is processed and commissions are paid out to publishers usually on a monthly basis.
So in summary, affiliate links credit sales referrals to publishers at no additional cost to the customer, and sometimes even a discounted cost through promotions that the affiliate has exclusive access too. And… this must all be done within the specified cookie length, anywhere between 24hrs (Amazon), to 30days (most programs), to lifetime (the rare ones).
How to Start Affiliate Marketing
To get into affiliate marketing is quite simple, you just need a few key components:
- A Target Audience, also known as a Niche – it is important to define this before you go picking a product to promote.
- A Product or Service – there is a methodology to picking the best products/services for affiliate marketing.
- A Website – you need a domain name and somewhere to host the website
- An Affiliate Program – find affiliate programs by simply typing in the “product/service + affiliate program” in Google search (e.g. “business furniture + affiliate program”). Or, join an affiliate network.
- A Consistent Flow of Traffic – traffic is the key. More traffic equals more potential referrals. Don’t forget that while 100 people may visit, only 10 click through and only 1 or 2 may buy. How many is down to the strength of your referral and the product/service offering.
Some of these components may seem a little daunting, especially to the beginners in the online business world, however I have created a comprehensive step-by-step guide on how to start an online business that you can follow.
Another great resource for learning how to start an affiliate marketing business, is a community and platform that I am a part of and a strong believer in. You can check out my detailed review of Wealthy Affiliate, and get your journey started for free. It is an all-inclusive platform that is second to none for learning affiliate marketing, as well as other types of online marketing needed to get your website out there and found!
Let’s go through some pro’s and con’s of affiliate marketing to give you a better picture.
- Cheap to Start – The cost of a domain (Typically $15/yr), the cost of website hosting ($60 – $100/yr) and maybe the cost of a training platform and community (a few hundred per year, beware of potential scams!)
- No Product, Inventory or Shipping Required – You simply promote and the merchant takes care of the rest, including customer service. However, you of course don’t get the same profit they do, and your reputation also hinges on the quality of the product and the service provided by the merchant… so do your research beforehand.
- One of the Ultimate Passive Income Strategies – You website is live all day every day, and people are online around the world all the time. Therefore, it can be earning you money at any point. It is therefore very scalable, as you don’t need to trade your time for money like in a traditional job.
- Potential to Earn a Full Time income – But be wary that this doesn’t happen overnight and it definitely doesn’t happen without work and learning the skill. There is no ‘cap’ to what you can earn, but it is completely dependent on you and your output.
- Promote what You are Passionate About – If there is something you are really passionate about and the research says there is potential as an affiliate business, you can get excited and start talking all day, every day, about the thing you love most!
- Many Avenues for Bringing in Traffic – There are many ways in which you can get your website and brand out there. Social media, paid search engine advertising and email marketing are just to name a few.
- You Don’t Need to Know How to “Code” Websites – There are website builders that do this all for you!
- You Can Do it as a Side Hustle – You can most definitely create a website outside of you normal working hours and build your way towards a bit of side money or even completely replacing your income!
- No Cash Flow at the Beginning – This is not something you can expect cash flow at the start, because it takes time to build up trust and engagement with both potential customers and search engines. You need time to build out your website, time to build out your content, and time to build your brand up as someone that is genuine and trustworthy. There are not get-rich-quick schemes here, it is pure grit and hustle!
- Optimizing Your Website to be Found in Search Engines is not Easy – But is it not incredibly hard or impossible to do and there are simple steps you can learn. It is called the principles of Search Engine Optimization (SEO)… and this also takes time, because search engines need to trust you too!
- You Need Some Understanding of the Internet and Computers – But I would argue you who doesn’t these days, and if you don’t then it is something that can be learnt! You just have to be willing to!
The Legalities of Affiliate Disclosure
So something to be aware of when starting out in affiliate marketing is that there are rules on disclosure of affiliate relationships you may have. This pretty much means you should be upfront and honest that you may receive a cut of the sales for things that you recommend to people!
Honesty is the best policy here, and most of the time people appreciate it and don’t mind clicking through your links to give you a benefit, because it doesn’t cost them any extra and you have hopefully provided them with some value through your website! Why shouldn’t you get paid, they would love the same thing for stuff they recommend to their friends!?
The rules are defined by the Federal Trade Commission’s Disclosure Compliance and are there to ensure that readers or viewers of internet content (blogs, YouTube videos, etc.) know if the author or presenter is sponsored, endorsed, or partnered with a different company. It is a good thing, and helps weed out the sneaky and downright dodgy marketers who try to scam you or lead you astray!
Affiliate marketing is a great way to get started in the online business world. You can do it as a side business, while still working a job, or use it as a way to spread your passion for something!
It is a simple system, cheap to start up and low maintenance once running. It presents a perfect introduction to internet marketing, where the attention of the consumers is going, where the money is going and where businesses should also go!
Hopefully this explanation has helped you get a better understanding of affiliate marketing and how it works.
Are you ready!? Yes! Then get pumped, get inspired and let’s create a remarkable business!
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Let’s Do This!
After you have a good picture of what Affiliate Marketing is about, you can check out the steps to starting your online business.
Explore the benefits of the Wealthy Affiliate platform, a free way to get you started in affiliate marketing.
Ask me any questions you might have.
Continue your journey through the online world!
Is this for you? Please let me know your thoughts on this type of online business in the comments below!
Hey guys! I have a strong passion for online business and enjoy helping people escape the 9-5 office, by creating online businesses. I want to help people build a source of income that is separate from their time, allowing them to pursue their dreams and passions. Together we can focus on designing a life we don't need to escape from! If you ever need any help or have questions, I'm here, just give me a shout anytime!