All right, here we go. Affiliate Marketing is a term that I wanted to know more about before diving straight in to the “where do I make the most money” task. I want to know a couple of things before I will start using it:
- What is Affiliate Marketing?
- How does Affiliate Marketing work?
- Why does Affiliate Marketing work?
- What are the risks or disadvantages?
So let’s dive into each of those questions before determining the next step.
1. What is Affiliate Marketing?
Affiliate Marketing: noun, a marketing arrangement by which an online retailer pays commission to an external website for traffic or sales generated from its referrals.
Okay, so basically this means that a website, blog or other medium promotes a particular product to deliver traffic to a shop or service. When that traffic turns into customers, you get a commission on the sale. Sounds good to me! After all, there’s nothing to lose so far.
2. Hoes does Affiliate Marketing work?
Searching into some more details about affiliate marketing. Depending on which affiliate marketing platform that you use, there are different ways of delivering content which might be interesting and provide new customers. One way is to integrate the offers or products (for example; shoes) into your already existing website or blog. So if I were to write a blog post about how shoes are made, I would integrate a link, delivered by the affiliate marketing platform, to The Awesome Shoe Factory who would then know that it was I who delivered the customer. Then when that customer makes a purchase, I would get part of the profit. Let’s break it down:
- Register to an affiliate marketing platform;
- Place links on your website;
- Visitors who use those links to make purchases are identified to come from your website;
I’m not sure if it’s that simple, so let’s look into the economics to get some more insight.
For publishers, the equation goes like this:
VISITORS x CLICK RATE = REFERRED VISITORS REFERRED VISITORS x CONVERSION RATE x AVERAGE PURCHASE PRICE = REFERRAL REVENUE REFERRAL REVENUE x COMMISSION = AFFILIATE MARKETING REVENUE
This means that in order to see how well you will do as a publisher, you need to estimate how many of your visitors will eventually result in a purchase of the product or service. The success will depend on the relevance of the product or service compared to your medium. If you are running a passive income blog like me, and I would start posting marketing links for music intruments, that will probably not result in a good referral rate. Instead I will try to focus on products and services related to finance, publishing and planning.
3. Why does Affiliate Marketing work?
I found a great explanation on why this works for all four (!) parties, this actually makes sense:
You: You are happy because you earned a commission;
Affiliate Marketing platform: They are happy because they earn a commission;
The Company: They are happy because they have a new sale from a customer that they wouldn’t have reached without you;
The Customer: He is happy because he bought a product that will fulfill his need or desire (otherwise, he wouldn’t buy it, right?).
4. What are the risks or disadvantages?
I’ve been thinking about risks and disadvantages of this type of passive income and came up with the following problems and solutions so far;
- Problem: My readers won’t just click random links.
Solution: I need to know what I’m talking about and believe in the product/service myself before redirecting them.
- Problem: Posting links can seem aggressive.
Solution: Don’t shove it in readers’ faces, if someone wants to buy a product, they can decide for themselves. Only recommend products instead of ordering or suggesting people to make a purchase.
Comment: Do you know any other problems? Let me know in the comments so I can share them with the rest of the readers, credits to you!
After my initial research I’ve registered an account with ShareASale where I will start my first Affiliate Marketing adventure. Any discoveries regarding this specific platform or Affiliate Marketing in general will be categorized as #2 Affiliate Marketing on my blog so you can easily locate them.
Once I get this going, I’ll dedicate a blog post to increasing Affiliate Marketing revenue so be sure to keep an eye out for new posts!